As the market for mergers and acquisitions whirs back into life, so too does the peculiar challenge that it poses for corporate communicators. So how should communication practitioners pave the way for the union of two distinct organisations? Caroline Parry reports.
As 2010 dawned, City analysts optimistically predicted that as the turbulence of the previous year was left behind, renewed confidence among chief executives would kick start merger and acquisitions (M&A) activity, which had slumped during the financial crisis.
Figures released in early June by Thomson Reuters show that while M&A deals in May fell to their lowest level for nine months on the back of the government-debt crisis in Europe, global M&A activity is still ahead of last year’s total by 22%. Some companies are still pursuing this complex, often messy, route to growth.
And there are plenty more deals in the pipeline. A glance at recent headlines takes in BSkyB’s mooted £160 million takeover of Virgin Media Television; Kraft’s increasingly hostile £11.5 billion acquisition of Cadbury; Renault, Nissan and others eyeing up South Korean carmaker Ssangyong; not to mention the soon-to-be unveiled merger of Orange and T-Mobile.
For companies either acquiring, being acquired or going through a merger, the key focus throughout the deal will be on the financial benefits and legal wrangling. But according to corporate communications experts, to ensure the deal’s success, more time and effort has to be invested in the human element of the transaction – the employees.
According to Simon Barrow, chairman of People In Business, a specialist consultancy that advises on employee communications during M&As, between 40% and 80% of deals fail to achieve their objectives because too little homework is done on how the cultures of two different organisations can be brought together.
He believes that, in the first instance, this is because the many advisors that work with companies are paid based on the deal being completed and not on whether it has been a success.
“You are buying clients, people and a brand and, if you lose any of that, you aren’t buying the company you thought you were”.
“You cannot separate the motivations of the senior people in a company and the dealmakers in mergers and acquisitions. The rewards are in the millions of pounds for them. But if you ask a City dealmaker what happened after they had completed their part of the deal, they won’t know,” adds Barrow, who is also the co-author of the recently published book, Employee Communication During Mergers and Acquisitions.
Many companies fall at the first hurdle in terms of developing a successful internal communications strategy by not including their communication teams at the very start of the process. Annette Frem, head of solutions at recruitment marketing and strategic communications consultancy Bernard Hodes Group, says this results in a delayed effect.
“Typically an upcoming deal is only discussed among the few at the highest level in the organisation and, if the responsibility for communication is not represented at board level, there is a risk of always playing catch-up. You then have the leadership excited and running ahead not realising that the rest of the company hasn’t even made it to the starting line.”
She adds that if companies fail to do the “upfront thinking” about the stages of the merger or acquisition process and to map out the emotions people will go through, employees will not necessarily follow the company on its journey. It is key is that management have a clear vision of what the company will look like after the merger and/or acquisition and that they use the communication efforts to keep explaining what that means to the employees.
“If one of the reasons that you were buying was the intellectual capital within the business and you suddenly see this investment walking out the door, it will potentially undermine the reason the deal went ahead,” says Frem “It is the very essence of the deal.”
When facilities management company Incentive FM acquired cleaning company Quality Assured Services (QAS) last year, Incentive’s managing director Jeremy Waud knew it was crucial to have a communications plan ready to begin as soon as the deal was signed.
“You have to run the communications strategy in parallel with the financial and legal side, which tends to be where all of the focus is. You need a documented plan of who you will communicate with and when that will happen. You are buying clients, people and a brand and, if you lose any of that, you aren’t buying the company you thought you were.”
The key to Waud’s strategy was to ensure that all staff were told in person. “The senior staff knew when the deal was signed and they passed this on to the regional managers who told their staff so it went through the management chain. I talked to the senior staff at my company and then took them to lunch and, then I went to QAS as their staff were told and did the same thing.”
Jim Houghton, partner at Results, an M&A consultancy specialising in the marketing communications sector, agrees that the first message has to be personal. “You have got to be able to look staff in the eye and they have to have the ability to ask questions. Staff will always assume the acquirers are in it for the money or that the company will just become a private equity vehicle. They will always assume the worst.”
It is important to have a manager skilled in both formal and informal communications to handle this phase, says Adrian Moorhouse, managing director of Lane4, a consultancy that works with companies going through organisational change. “It is a two way process. There is the temptation with formal communications just to send out the process and not track that it has been received. There have to be forums (fora?) for people to ask questions and give feedback.”
In the early days of the deal, the communications strategy has to be focused on reassuring staff and outlining what it the deal will mean to them personally. Houghton warns that it is essential to present this using positive and upbeat language and to talk about partnerships rather than mergers or acquisitions, to avoid creating an atmosphere of “them and us”.