It’s 3am. Lawyers and advisors of a takeover target sit squashed in a downtown hotel suite, empty coke cans and coffee mugs litter the room while reams of paper are poured over. Across the hall in a bigger suite the acquirer’s team of lawyers and advisors check emails and wait for phone calls from across the hall for more documentation. This is the mergers and acquisition (M&A) process as described by a bank lawyer friend of mine.
Call it what you will - a friendly takeover, synergy or absorption, this is one of the most exciting areas in business. M&A experienced a massive slump as a result of the global financial crisis when the CFOs clung onto their balance sheets like castaways on a raft. Now as we move into the “new normal” (thank you McKinsey &Co) where money is more expensive but more available, M&A is again on the rise - and a good a communications strategy around the practice can mean short and sharp success.
There have been many cases where poor communications on a merger has led to its near collapse or value depreciation. Financial journalist Steve Lipin uses the examples of Hewlett-Packard’s acquisition of Compaq, Conseco’s acquisition of Green Tree Financial Corp. and Newell’s takeover of Rubbermaid Inc as examples earlier this decade.
These companies’ employees and shareholders experienced long periods of uncertainty with minimal communication from management, executives or the board. They filled the void by circulating rumours and myths about the situation, which either led to the transaction’s collapse or dramatically reduced the acquirer and takeover target’s value. The above organisations relied on their lawyers and advisors to contract out communications. No offense to lawyers but they are best to stick to the detail and shouldn’t be concerned with top line positioning and key messaging.
It is absolutely vital that both the acquirer and takeover target have in place a co-ordinated communications plan months before any announcement to help fill the vacuum and begin to influence the decision makers.
Treat it like a political campaign. You are dependent on a group of stakeholders on your survival - and if you don’t convince them that your way is the right way you will be forced to abort your mission.
At the centre of the campaign are a few must haves:
1. Do you have a credible story, with clear targets, that can be communicated, accomplished and monitored, over time, by the acquirer and investors?
2. Does your story remove uncertainty and give direction to the organization so that employees can effectively deliver?
3. Does your story link post-merger integration plans to the economics of the transaction?
(Thanks again to Steve Lipin for the checklist)
Takeover targets want to know one thing: what is in it for them? Will my job be safe? Can I get a pay out? Will my shares go up or down?
A communications plan will help executives and the board answer these questions from stakeholders. They will uncover issues that are usually an afterthought in the heat of due diligence but are typically the ones that can make or break a merger. These issues usually come from concerns from employees and shareholders so they must be top priority in any communications planning. And don’t forget, most employees are shareholders too!
M&A communications is a beast all onto its own. It can be aggressive or subtle, yet always highly strategic. Getting good advice and a good plan early is paramount for any successful transaction.
Heather Gilmore
Heather is a communications consultant, former Senior Manager at Westpac and media advisor to a NSW Premier and Treasurer. She is also an Associate Account Director with Bluegrass Consulting. Heather’s blog is at hgcommunication.com
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