Smooth transition: developing the ideal M&A comms plan

August 2021  |  COVER STORY | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

August 2021 Issue

Effective communication is crucial at every stage of the M&A lifecycle – be it due diligence, deal agreement, integration and value attainment – if a transaction is to achieve optimum transformation, deliver operational efficiencies and enhance revenue-generating opportunities.

The reality, however, is that the majority of M&A deals fail to deliver on expectations – between 70 and 90 percent fall into this category, according to most studies. A great many of these share the common theme of lacking a coherent, beginning to end communications plan for employees, customers, suppliers, stakeholders and others.

Such incoherent planning arises from the disruption and confusion that an M&A transaction generally engenders. Uncertainty creates significant problems for practitioners attempting to achieve integration success. Essentially, stakeholders want clarity.

“A comprehensive communications plan is critical to the success of a transaction,” says Michele Nichols, president of Launch Team Incorporated. “Careful consideration of the impact, opportunity and concerns of employees at every level, as well as customers, vendors, industry partners and all other stakeholders, can help a company identify key messages and communicate them clearly and consistently.”

In the view of Jon Burke, an associate partner at Global PMI Partners, it is particularly important to have a communications plan that senior leadership has bought into and is in line with the strategic vision of the acquisition. “It is not at all uncommon for acquirers to release an announcement regarding an acquisition, then move on to the next deal, while ignoring concerns that the target business and its staff may have,” he contends. "Communicating the acquisition in line with the overarching strategy demonstrates a purpose and fit that stakeholders can buy into. Also, be sure to highlight the success of the business that made it such an attractive target initially, and how you plan to help it thrive as part of the new organisation.”

“Negativity is likely to ensue when companies fail to implement comprehensive communications throughout the M&A lifecycle,” notes Christopher Kummer, president of the Institute for Mergers, Acquisitions and Alliances (IMAA). “The better a communication plan for Day One and beyond, the less likely a company is to encounter resistance to change. Transitional teams are dealing with a lot of moving pieces and must rely on a plan that aligns with their overall M&A strategy.”

Teams also need to decide if a plan should be adjusted or redesigned for each transaction. “There should always be an element of customisation in the communication of a deal, taking into account the communications culture the target is used to,” continues Dr Kummer. “Whether existing communication plans should be customised for each deal individually will depend on numerous factors, such as the size of the acquisition. If you acquire a great deal of similar companies, customisation will suffice.”

Another factor that may require tweaking a communications plan is the type of transaction being undertaken. Acquisitions, for example, pose different challenges compared to a one-off carve-out, while cross-border M&A involves dealing with the culture of both the target company and its country. “Different types of deals will require greater customisation or even a new communications plan,” adds Dr Kummer.

Comprehensive planning

Having a comprehensive M&A communications plan in place helps ensure that the right messages are effectively disseminated in order to minimise anxiety, boost morale and retain talent. Such a plan should also set out the combined company’s future vision and strategy to key stakeholders.

“A comprehensive plan is multichannel and multistakeholder – reaching with a message that resonates,” says Ms Nichols. “It begins with the vision – the ‘why’ of the transaction. This needs to be more compelling and tangible to the individual than operational efficiencies. All employees matter, and they should hear the initial announcement at the same time in the same way, as succinctly as possible, with a known timeline and means of additional details.”

According to McKinsey, a six-step process is essential to building, executing and constantly monitoring and improving merger communications. It is the “glue that holds everything together”.

First, identify key stakeholders. Every merger has a wide range of stakeholders, and each kind of stakeholder requires a customised approach and targeted messaging. Broadly speaking, stakeholders can be classified into two groups: external and internal. Internal stakeholders are primarily employees of the two merging companies, while external stakeholders include investors, who must be persuaded of the merits of a deal, and analysts, who expect management to make the strategic and financial case for it.

Second, identify the main milestones and trigger events. The communications workstream springs into action very early in the merger process, and the pace rarely lets up much. An effective communications plan identifies milestones, such as Day One and trigger events, including the announcement of leadership appointments. The goal is to spend the majority of time and energy on the material events, while making sure that regular updates continue to flow.

Third, set up governance and resourcing for the communications team. A clear governance and resourcing process should be established which clarifies roles and responsibilities, such as the integration steering committee, the integration leader, the communications leader and the communications team. Effective and timely execution requires well-defined governance – a process for approving and disseminating communications.

Fourth, develop core messages and a ‘deal narrative’ to anchor all communications. These should arise from the deal’s rationale, the employee value proposition (EVP) and the associated change story. The rationale is an articulation of the core reasoning for a deal and its drivers of value. All communications should reinforce and build from core messages and be personalised further for each group of stakeholders.

Fifth, develop the step-by-step plan for each milestone. Communications teams should use a wide variety of channels to reach their intended audiences and to ensure that messages sink in and get reinforced. Deciding which channels to use for each deliverable is a critical component of building the communications-activity plan, with social media playing an increasingly key role, especially for engaging employees, customers and the general public.

Finally, establish two-way communications – monitor, gather feedback and adjust. Creating two-way feedback channels is critical to ensure that messages are received as intended and that gaps are flagged and addressed appropriately. A good feedback-collection process uses a number of tools, such as pulse surveys, integration barometers and website or email feedback. Once all this has been gathered, the communications team analyses the feedback and takes corrective action.

“It is important to have a structured communications plan as this is vital to clarify what comes next in a merger, separate fact from fiction and drive success for the combined businesses,” says Mr Burke. “This should be a process that is consistent in style and messaging, especially for serial acquirers, but also adaptable to suit the needs of the stakeholders and cultures involved. Be mindful that when there is silence and a lack of communications, it is easy for staff to fill the void with their own narrative.”

In the experience of Leslie Benson, senior managing director at FTI Consulting, it is important to set strategic priorities and assess whether these are achievable with the resources to hand. “The golden rule is do not promise to communicate and then fail to do so,” he affirms. “Explain why you are communicating, what the restrictions are and the likely pace of that communication over the lifetime of the deal. Then provide feedback mechanisms that can address issues as they arise and avoid ‘water cooler’ chat driving sentiment.”

Mistakes and resistance

While regular communication to all stakeholder audiences is one of the hallmarks of a strong M&A integration plan, the flip side, poor communication planning, has the potential to negatively impact a transaction. This can slow down the integration and affect morale, as stakeholders become increasingly desperate for accurate information. Indeed, human nature being what it is, it is virtually inevitable that mistakes will be made and that varying degrees of resistance to the merger process will emerge.

According to Joe Aberger, executive vice president at Pritchett LLP, as important as it is to know what to say while executing a plan, equally important is knowing what not to say. In his experience, at least one of the following wrong-headed remarks will be uttered: “we do not anticipate making any changes”, “this is a merger of equals”, “we plan to take the best of both worlds”, “it will continue to be business as usual”, or “the cultures of our two companies are very similar”.

“During an M&A, people are primed for change,” says Mr Aberger. “Being acquired or merged changes things psychologically. It affects people’s perceptions, their career outlook, as well as corporate politics. Being human, people aim their attention toward those cultural flashpoints where the two companies’ behaviours and beliefs do not align. They will grit their teeth as they deal with inevitable differences in their corporate personalities, resenting how management made false promises about cultural compatibility.”

In order to mitigate resentment (and before the communications plan is finalised), companies would be well-advised to anticipate the various negative reactions they are likely to receive and prepare appropriate responses, with potential detractors identified so that they may be assured that their concerns will be heard and addressed.

“The tone of voice, timing and delivery channel of these messages should be appropriate,” suggests Mr Burke. “Clearly, you want to focus on the positives of the deal as much as possible, such as enhanced career development opportunities for staff or the introduction of new technology for clients that will improve service levels. It is certainly worth having a well-thought through Q&A document for managers and other key staff in anticipation of any negative response.

“In addition, one-on-one conversations with trusted leaders remain a highly effective means of influencing attitudes and perceptions,” he continues. “Leveraging key management or sales relationships during and after the announcement is vital to building buy-in. In terms of onboarding suppliers, focus should be on the opportunities for the partner company, such as growth potential and forging stronger relationships, while also sharing their expertise to benefit the new company.”

Post-pandemic communications

Choosing from the innumerable communication channels available today is likely to be a key challenge during M&A going forward, particularly in a world slowly emerging from extensive coronavirus (COVID-19) pandemic-related disruption.

“To the extent that mergers result from companies acquiring distressed assets impacted by COVID-19, communicators will need to take careful account of how, through that merger process, employee anxiety and personal concern are channelled into confidence and a sense of commitment in a joint future,” says Ed Bridges, senior managing director at FTI Consulting. “The need to address security and belonging will apply variably to mergers where synergies go well beyond survival and cost efficiency.”

Beyond these issues, Mr Bridges foresees two additional key challenges. “The pandemic, along with the Black Lives Matter and the #MeToo movements, have ignited a greater need in companies to engage and unite employees around purpose, values and the promises acquiring companies make in respect of environmental, social and governance (ESG) issues,” he suggests. “That will require a more thoughtful alignment of individuals and teams with the acquiring company’s organisational drivers.”

The second challenge concerns loyalty, retention and productivity. “COVID-19 has brought the future forward to the extent that we are likely to see many companies working on a more hybrid basis – an evolving reality that will play heavily into communications planning through M&A,” believes Mr Bridges. “Inclusivity, securing loyalty from people working in disparate environments and enabling and uniting them to interact and engage effectively through change are likely to become essential ingredients.”

At the same time, many recognise that change fatigue is at an all-time high, with anxiety around market volatility and the pandemic creating new questions and concerns among employees already experiencing high levels of burnout.

“While communication and collaboration toolsets have expanded so rapidly that employees may be uncertain how they will hear about the news that matters to them, a comprehensive M&A plan is the key to planning, listening, anticipating, communicating and reacting in tune with stakeholder needs,” concludes Ms Nichols. “A singular vision – focused on the end customer – can help to keep M&A communications productive and meet organisational goals.”

© Financier Worldwide

BY

Fraser Tennant