Three Stages of Merger Communication


The media may love hostile takeover attempts—witness the amount of ink devoted to the current attempt by Microsoft to acquire Yahoo, or last year’s purchase of the Wall Street Journal by Rupert Murdoch’s News Corp. But these are the exception. Of the more than 8,795 mergers and acquisitions deals announced worldwide this year, the vast majority have been friendly.

From a communication perspective, friendly deals have three phases: pre-deal planning, deal announcement and post-integration. (In contrast, hostile deals, which require 24/7 crisis management, have more phases, and can include lobbying shareholders for proxy votes and litigation.)

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Pre-deal planning
Planning M&A communication may be a communication team’s most confidential assignment—much more so than quarterly earnings—and their most important one, too, since an M&A deal is a great opportunity to reposition the company. Ideally, senior management will invite you to the table as part of a cross-functional team that could include general counsel, investor relations (for public companies) and HR as soon as the deal looks real.

One of the initial challenges faced by the communication team is to create and finalize the merger plan and documentation within a short time frame, and without a lot of information, since details change during each negotiation session. As with any announcement, you need to:

Define the deal:

  • Who’s doing the acquiring? Is your company acquiring or being acquired? If your company is doing the acquisition, you will have more control over the process—and more work to do.
  • What is being acquired? Is it the entire company or a business unit?
  • How much is the deal worth? If the deal involves two small, private companies, you may not want to disclose the actual figure, since the media’s interest heightens when a lot of money is at stake. However, reporters may be more interested in a smaller deal involving a “hot” company or sector than a larger deal involving two decent but unexciting companies.
  • What is the strategy behind the deal? Is it to gain access to new markets, new technology or services, or to provide improved customer service by combining complementary offerings for one-stop shopping? In other words, why does this deal make sense, and why are you doing it now? Communicating the strategy effectively can help you sell the deal—which is especially important when shareholders of public companies are involved—but it’s important, too, to sell the deal to the marketplace. For example, a lot of people questioned the strategy behind the eBay-Skype deal—and, after eBay wrote US$1.4 billion off the acquisition, many are still skeptical.
  • Will there be regulatory issues? Most deals don’t encounter problems, but it’s important to ask so you can be prepared to address the communication implications. Deals that may be approved by U.S. agencies have sometimes run afoul of EU agencies.

Define the announcement:

  • When can you announce it? If the deal involves a public company and it is material (the lawyers will make that determination), you have to announce it as soon as the contracts have been executed. Otherwise, you may have some discretion as to when to announce.
  • What are the goals of the announcement? The initial goals for the acquiring and target companies may be very different—especially if what’s being acquired is only a division—but the communication teams from both have to get together and finalize consistent messages.
  • Who are the main audiences for the deal? Stakeholders may include shareholders, current customers, local community leaders and employees. Determine each audience’s needs and interests and develop appropriate messaging.
  • What are the logistics of the announcement? The CEO of the acquiring company should travel to the headquarters of the target company to welcome new employees. But if the target company has multiple offices across countries and time zones, reaching all employees at the same time will be an issue.
  • What’s changing? Is the new entity changing its name, management team, stock ticker, logo or headquarters?
  • Who’s writing the press release? If the acquisition involves an entire company, you need only one release. If a business unit is being acquired, the company selling the unit may want to issue its own release to explain why the sale makes sense.

For public companies in particular, communication departments must keep information confidential before the announcement. A lot of companies use code names for the deal itself and for the other company involved. Otherwise, you have a crisis, as was the case when the Wall Street Journal broke the news that U.S.-based Federated Department Stores was discussing a possible acquisition of U.S-based May Company—setting off a month of rumors that had to be handled concurrently with negotiations.

Deal announcement
It is important to understand the level of interest in a deal in advance. Reporters’ first question is always about the size of the deal. The trade press is likely to be more interested in smaller, private deals, while the Wall Street Journal, New York Times and Financial Times generally don’t cover deals worth only several hundred million. Sometimes, though, even billion-dollar deals get only a brief mention.

If you don’t have a billion-dollar purchase price to discuss, you should consider whether it makes sense to generate compelling story angles that could include a profile of a changing market, implications for customers, a new initiative for an older company or a new business model.

Either way, deliverables for the announcement can include:

  • A key message and positioning document.
  • Press releases and an updated B-roll package.
  • A time line for updating both companies’ web sites and intranets and alerting employees and customers of both companies, the media, financial and industry analysts, and industry pundits, including key bloggers.
  • A script and roles for press conferences, analysts calls, etc.
  • A comprehensive internal question-and-answer document with information about the deal, product and/or services integration, new corporate positioning, and potential layoffs or executive changes.
  • A list of communication vehicles to be used to reach different stakeholders.
  • A set of benchmarks such as share price, customer and employee retention, analyst ratings, message pickup, market share, etc.

For the announcement to be successful, the two companies need to make sure they are in synch on the goals and messages. You must prepare executives on both sides to communicate key messages and address the likely questions. As the number of cross-border deals rises, this point is very important. I’ve heard of a merger that got off to a rocky start because a non-native English speaker told a reporter that the two companies had a long history working together—but then mispronounced the name of the acquiring company.

Too often, once the financial and legal aspects of the deal have closed, an organization’s focus shifts to the next initiative, and post-integration communication gets devalued. But the post-integration phase of communication, targeting employees and customers, can be vital to the success of the actual deal itself.

In fact, now comes the tough part: implementing organizational change, integrating aspects of two different cultures, ensuring employee morale—that is why communication needs to continue to support the merger. Ideally, the communication function must work closely with HR and IT during post-integration to define the company culture and eliminate uncertainty.

Employees are going to have lots of questions, starting with whether the deal’s promise of “enhanced efficiency” means layoffs. Employees will also have questions about benefits and incentives such as health insurance, retirement and pension plans and profit-sharing programs. They will also want to know about the impact on product lines and services, sales territory, and reporting structure. And then there are the details, such as how they should answer the phone after the deal has been announced but before it has officially closed, as well as when they will get new business cards and letterhead. Some questions may address whether the acquisition will affect sponsorships and corporate philanthropic programs.

The communication department should identify and enlist cultural ambassadors among employees, and continue to regularly update them on progress as well as obstacles to the integration. Part of employee communication entails establishing a feedback tool that lets them ask questions along with suggesting new improvements.

Be careful: If you commit to monthly e-mail or newsletter updates, you need to keep to that schedule. Miss a regularly scheduled update, and employees are going to notice. They will be concerned and could start rumors that the deal isn’t going well.

That’s why it is vital that an M&A program focus not just on the first two phases of the deal, but also on the post-integration phase.