- October 18, 2019
- Posted by: Ramkumar
- Category: Mergers And Acquisitions
Why communication strategy is important in M&A integration?
A successful M&A integration needs to unite and inspire people around a common vision.Invariably the vision would be to achieve the objectives of the deal.To make this happen, smart, carefully timed and executed communications are critical. Companies spend shareholders money to acquire businesses to gain market share and improve earnings.Yet we see that a majority of the M&A transactions do not improve shareholder value.The overall success rate of M&A transactions still continues to be low.
The primary reason for the high failure rates is because the two companies were simply unable to mesh brand values and company cultures.
Any M&A transaction will trigger uncertainty especially among the target company’s employees. The rapid change caused by M&A can be unsettling and inherently emotional.
For any M&A deal to be successful in the longer term, it is important that both companies are able to align to a common culture.In order to achieve this, authentic and timely communication is a must have, not just at the time of deal announcement but through the integration process.This is critical to winning the trust and support of all the important stakeholders to ensure a successful outcome.
The right communication strategy for M&A integration
- Before designing a communication strategy for a M&A deal, it is important to realize that optics matter as much as effectiveness.
- If an acquirer falters on his messaging on critical days like deal announcement, then it can have disastrous consquences.Employees don’t see honest mistakes and good intentions.Instead of it, trust is broken which can sometimes be very hard to win back.
Have a Communication Lead
- It is always advisable to have a communication lead involved in the deal.Looping communication lead at the last stage is often a recipe for disaster. A communication lead can always play a constructive role to advise a deal team in what, how and when to communicate information to the target company and share information externally.
- In many cases, the members of the deal team can put confidential and sensitive information shared by the target company during the due diligence period in a social platform like Linkedin.This can put the entire transaction at a risk.At the same time, this action also breaks the trust between the acquirer and target organization.These are the mistakes that a seasoned communication lead can spot and prevent.
Communication plan needs to holistic
- In a M&A transaction, there are multiple stakeholders involved.Some of them are internal stakeholders like employees.The external stakeholders includes customers, shareholders and partners.When reaching out to internal and external stakeholders, it is important that the messaging should be specific to their context.
- A short sighted strategy can result in negative headlines and publicity which can undermine the deal value.This can also impact the hardwork of the integration team who are preparing target company’s employees to positively embrace change.At the same time, giving too much information even though well intended is not advisable as this can invariably result in a media leak or end up going into competitors hands which can jeopardize the chances of deal closure.
- The communication needs to be done based on defining each stakeholders needs.The messaging needs to address the requirements of each stakeholders.
Build a simple and appealing story
- M&A narratives must be highly controlled and consistent.The building blocks of the narrative should be clear, compelling and consistent.
- In many transaction, there will more than one narrative for each stakeholder group – employees and customers.This is not right.There can be some customization to the narrative based on each stakeholder but the basic version should be same.
Communicate early and often to the employees
- In a M&A context, No news means Bad news.This doesn’t mean employees need to know every minute details of the pending deal but employees need to be made aware of the direction the business will take post acquisition and what would be their roles and responsibilities.The acquirer should be committed to foster a collaborative dialogue with employees.
- The acquirer need not have all the answers upfront.Instead the acquirer should focus on the integration process so that the employees know what to expect.The acquirer should create regular touchpoints for employee engagement which can help in building employees trust and at the same time assuage their concerns.
Communication medium matters
- The sensitive information should be carefully communicated and in a right medium.Anything that is written and distributed internally is always at the risk of being leaked externally.
- Hence it is important that sensitive information shared by the acquirer’s leadership should be relayed in a townhall setting where the sensitive details is shared along with the context.
- Before sharing any information in a written form, the acquirer needs to consider the company’s culture, employees needs and assess the overall risk of the situation.
Announcing the deal is just the beginning in M&A integration
- Many acquirers assume that the major role of the communication lead is to construct and execute a communication strategy that articulates a compelling M&A narrative that has been positively received by employees, customers and media.An effective and smart communication strategy is essential to bring different groups of employees together and also ensure that the right communication protocols and infrastructure are in place.
- The role of the communication lead extends even after the deal is closed. The work continues as the communication lead gets ready to set up discovery sessions and workshops with target management to set up trainings.The other major activities would be setting up sessions with leaders, periodically providing updates on the integration and distributing relevant collaterals, documents over multiple channels.
Communication is vital in M&A integration
- Communication strategy is vital in M&A integration as it can make or break the deal.
- An effective and smart communication strategy is essential to bring different groups of stakeholders (employees, customers and partners) together and ensure that the right communication protocols and infrastructure are in place.