April 16, 2018
M&A Communications: Key Questions to Ask
Here’s a guest blog from Eden Gillott Bowe, President of Gillott Communications:
Getting an M&A completed is tough enough. Don’t let your communications trip you up and cause the deal to go south. What are the best ways to communicate news of a merger or acquisition? Here are six factors you need to consider before crafting your strategy.
Is it friendly or hostile?
If it’s friendly, it’s easier. Your communications can be along the lines of “Look at all the amazing things that will happen as a result!”
If it’s hostile, you’ve first got to convince the other side that a merger is in their benefit and the price being offered is fair (if you’re the acquirer), or that your true value is far higher and it’s best to remain independent (if you’re the target). Your primary focus is convincing shareholders, who have the final word.
If it’s a large deal, you also have to convince regulators. Consider AT&T and Time Warner’s battle against the Justice Department’s suit to block their merger on antitrust grounds. Ultimately, the case will be decided on whether the merger is beneficial to consumers (as the companies claim), or whether it will create an unfair market and drive up prices (as the government claims).
Are the companies prominent & where do they operate?
If it’s a middle-market company and isn’t attracting widespread media attention, your primary goal is to communicate to employees, investors, vendors, etc. Your focus is on merging cultures and making sure everything goes smoothly.
Local media might cover it. Say a large out-of-town company swoops in and absorbs a smaller local company. There will be concerns (legitimate or not) about potential layoffs — how many jobs (and families) will be affected and what impact it will have on the local economy. You must deal with those delicately and with empathy.
Are the companies public or private?
Public companies must disclose material developments in public announcements or SEC filings.
If one company is large and public, a small acquisition may not be material. Still, it may be beneficial for the larger company to make a public announcement. The goal: Show how and why it’s good for the companies and the communities where they do business.
If a company’s private, the “materiality” rule doesn’t apply. Your communications are focused on reassuring employees and vendors about the positive outlook going forward.
When should you begin a campaign to earn employee buy-in and avoid an exodus?
This is tricky. When negotiations are underway but there is no agreement, you are limited in what you can say.
Internally, it’s a delicate balance. You can’t tell employees much more than you’re saying publicly because they might spill the beans. But you don’t want to leave them in the dark because they’ll lose trust in you.
Secrets don’t stay secret. Whatever you tell your employees, assume it’ll become public. If you tell them where plants will be closed, a reporter will find out and it’ll become part of the story.
One obvious way to avoid gossip: Hold meetings off-site, not at either company. Walls can talk. Employees will see people coming and going, and rumors will start flying.
Are layoffs anticipated?
If you say nothing, employees will think the worst. But never make promises you can’t keep.
While you may hope everyone keeps their job or even more are created, that’s usually not the reality. It’s better to focus your communications on how many dollars will be saved, new initiatives and projects that will be created, and how remaining workers will benefit.
Choose your words carefully. Qualify what you say, such as, “We don’t expect a significant overall decrease in our workforce.” Avoid definitive statements such as, “There will be no layoffs.”
What do I say when I don’t know the outcome?
How a deal ends up may bear little resemblance to what it looked like at the outset. So your communications strategists must be flexible.
Consider these scenarios. In a single weekend, three different announcements with different justifications had to be formulated as a company was negotiating to shed an underperforming division.
Selling the entire thing? This was the original plan. The Spin: “These assets were operating below our desired ROI, so we are monetizing them.”
Buyer decide only to acquire half? The explanation changed: “This division is a successful operator in a growing business. We’re retaining half so we can capture its upside in the future.”
Deal collapsed? New storyline: “We had considered selling the business, but its potential is too great to let it go.”