By Brad Kostka - Roopco | April 18 2024
According to the Harvard Business Review, “70-90% of acquisitions are abysmal failures.” There are many reasons for this. One is a lack of clear, concise and timely communication. This can scuttle a deal or drive it off the rails after the transaction has closed.
Implementing a strategic communication plan will manage expectations, alleviate fears, and ensure clarity and alignment among all stakeholders. It also helps in maintaining business continuity, minimizing disruptions, fostering trust and influencing the success of the integration process.
The first step in developing an M&A communication strategy is identifying the key stakeholders in the process. Buyers and sellers will have their respective deal teams, which typically includes company leadership, along with experts in finance, law, operations, HR, IT, real estate, environmental health and safety, and communication. An often overlooked, yet critical, audience is the rank-and-file employees. Their buy-in is vital to a transaction’s success. In addition, there are external stakeholders, including customers, investors, suppliers, regulators, news media, and the communities in which the companies operate.
Once these audiences are determined, key messages, communication channels and distribution schedules need to be developed for each.
A buyer seeking acquisition candidates needs to develop an effective story about the types of businesses (industry, size, strategy, etc.) it is seeking to acquire and why it is a good strategic fit (value drivers, culture, experience, etc.) for them. Then, this story needs to be told in a consistent manner across the channels that reach potential acquirees.
Similarly, companies that are looking to sell need to develop a story and positioning that appeals to potential acquirers. This is typically the role of investment bankers and they may engage external communication consultants as well. Proper positioning will help attract right-fit buyers and earn a higher multiple. This, of course, is in addition to having good operational procedures and financial metrics in place.
During the due diligence phase, balancing transparency with confidentiality is key. This involves clear communication about the boundaries of information sharing, establishing non-disclosure agreements, and ensuring that all parties understand the sensitivity of the information. Effective communication at this stage supports a thorough understanding of the deal on both sides, mitigating risks of future discontent.
It is particularly important to keep track of who knows about a transaction, ensuring that leaks and rumors do not jeopardize the process.
It’s best to keep those involved to a minimum and then expand the team over time as various types of expertise are required and the deal moves toward closing.
For non-public companies, the rollout should start with direct communication to employees. A best practice is to take a trickle-down approach so that they hear the news from their direct manager who is provided with message points that answer any questions they may have.
At about the same time, key customers should be informed. They’ll need to know how the transaction may impact them, particularly as it relates to cost, customer service and delivery times. From there, a broader communication rollout typically takes place with the issuance of a news release, social media posts, and calls or emails to other stakeholders.
For public companies, regulatory bodies usually require that communication of the deal be made public to all investors at the same time. This is generally done via a press release issued through a newswire service. Once done, communication should quickly roll out to employees and then to other stakeholders.
A mistake companies often make is failing to maintain consistent communication after a deal is announced. This is especially critical with employees as they are the ones who will have the greatest impact on whether or not the transaction is successful.
Post-transaction communications should focus on integration — blending two distinct corporate cultures and aligning divergent business practices.
Managers need to continually be informed throughout the integration process so that they can alleviate any questions or concerns that frontline employees may have.
On this week’s episode of PRGN Presents, we discuss these M&A communication best practices, and how companies involved in a transaction – whether buyers or sellers – can help ensure that their deal is a success for all involved.
If you enjoyed this episode, please follow the PRGN Presents podcast in Apple Podcasts, Spotify, Google Podcasts, or any other podcast app. We publish new episodes every other Thursday. To have them delivered automatically and free of charge, just choose your preferred podcast player from this list, open the app, and click the button to “Follow” or “Subscribe” to the show: https://prgnpodcast.com/listen
