M&A transactions don't always fail because it is the wrong thing at the wrong time. Sometimes bad communication can scupper them entirely, writes Brigitte Kaps in a piece for finews.first.
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The terms merger and acquisition, now known euphemistically as M&A, have become synonyms for cost-cutting and job redundancies. Most of the time, the rumor mill starts the minute they are announced.
Ideally, a clear strategy has to be agreed upon during the planning stages of any transaction setting out the approach towards communication. Unfortunately, that is not often the case. Poor or inadequate communication can have a massive impact on one of the most important success factors of any live deal: trust.
«Often, a kind of hunter-and-prey syndrome results between the teams»
Not paying enough attention to communication leads to rumors, uncertainty, and negative public relations. Integrating two different business cultures after the deal has been signed is difficult and frequently underestimated. In fact, this poses particular challenges during outright acquisitions. Often, a kind of hunter-and-prey syndrome results between the teams that are on the side of the buyer and those who are being sold.
The fundamental question to all M&A communications: what do I communicate to whom – and on what channels?
The fact is that each of the six phases of a transaction requires specific communications while also being prepared for all eventualities, including a deal leak:
- Phase 1: deal preparations/planning
- Phase 2: contact between potential buyers and merger partners
- Phase 3: negotiations and due diligence followed by the signing of a letter of intent
- Phase 4: signing or purchase or merger agreement
- Phase 5: closing
- Phase 6: building the new company's brand and image
Every single deal has to be communicated in a way that inspires confidence and trust while also being regulatory compliant, regardless of how large the volume of the transaction is or how many of them are being undertaken. A concrete milestone for when communication doesn't start, however, doesn't really exist.
A company is not always required to necessarily make any disclosures. Unlisted or privately held companies that are being fully sold do not fundamentally need to provide any information to employees.
«Every single M&A transaction is guaranteed to make employees uncertain»
However, in the cases of an asset deal in which all contracts and assets are transferred to the new owner, there is a duty to inform (Article 333/OR in the Swiss Federal Act, Code of Obligations).
Every single M&A transaction is guaranteed to make employees uncertain. This in and of itself should not be underestimated. It can even lead to the deal turning sour after closing, particularly it if creates a great deal of fear or resistance internally. Trust can end up being one of the most important success factors.
Having engaged and productive employees is fundamental to a positive outcome. The objective should be to minimize the length and depth of any loss in efficiency, which usually starts when the deal is first disclosed. That means keeping all employees and business partners informed in a timely fashion about any operational changes that could have an impact on their work, in order to prevent any larger disturbances.
«The reasons for doing a deal and a logical equity story are not enough»
Regular dialogue between leaders, management, and employees is essential. The key messages should be about support and active engagement. If employees continue to be involved and are able to meet the changes head-on, in front of clients, that will help the deal be a successful one.
A believable story is important. The reasons for doing a deal and a logical equity story are not enough to convince all stakeholders. Incisive key messages and storylines derived from numbers and facts should be communicated clearly to each target group. You have to know your audience. That is the only way a visible and approachable management can create trust and convince stakeholders.
«Suddenly dumbfounded managers are embarrassed by having a non-existent communication strategy»
Good preparation is worth its weight in gold. It is often when information is leaked to the media, unexpectedly, that suddenly dumbfounded managers are embarrassed by having a non-existent communication strategy. As part of planning, one should not underestimate that leaking insider M&A details can be a tactical element that one of the parties involved may have an interest in pursuing. The social media profiles of employees of a potential takeover candidate may suddenly be visited by potential bidders.
It is an alternative way to show interest in buying the entity publicly while also increasing the rumors surrounding any potential deal. M&A transactions play a key role if they are correctly and effectively implemented. They can engender trust and contribute to the future success of the newly created company.
Brigitte Kaps is the CEO and founder of Rent a PR. She holds a Master of Advanced Studies in Business Communications (HWZ, MAZ & LSE) and has studied communications at the Frankfurt University of Applied Sciences. She also has 25 years of international experience working in bank sector management roles at ABN Amro, GE, and RBS, 10 of which were in the corporate finance and investment banking areas. Before starting her own business in 2015, she headed corporate communication as a member of executive management at Cembra Money Bank (previously GE Money Bank).
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