My big fat M&A
Guest column | Tips on the communications techniques you need for a successful acquisition
- By Larry Rosenfeld
- Aug 07, 2008
In the rush to grow revenue and capture market share, government contractors must match their size, capabilities and talent with customer requirements. This often presents the need to buy missing assets or develop them internally.
As the consolidation of many contracts into mega-task-order procurements increases, contractors need all the relevant capabilities and talent in-house to win prime contracts.
Mergers and acquisitions are increasing in the government marketplace for the same reasons. Companies buy others to gain security-cleared talent, niche skills, technical innovation, access to new government customers and the competitive edge necessary to compete for highly sought-after contracts. Acquisitions can improve market position and allow a company to tap into a larger pool of talent.
For the most part, companies buy one another for human assets and contracts so they can better serve customers and build revenue. But acquisitions present significant risk and create chaos and uncertainty for the employees and customers of both companies.
One of the most powerful yet often overlooked tools for maximizing the value of a merger is a robust strategic communications program geared toward all stakeholders. From the initial announcement of the pending merger through the closing of the deal, ongoing communication is critical to maintaining loyalty, motivating employees to stay focused on their jobs and promoting positive perceptions of the acquisition among all key audiences. A strong communications plan helps maintain credibility and ensure successful execution of the master integration plan.Merger missteps
Time and again, potentially successful mergers fail and the acquiring company ends ups with empty desks, old computers and soon-to-be-ended contracts. Mergers often fail because the companies did not properly communicate the benefits and rationale for them. It is important to brand the merger and communicate what the new brand means to all key audiences.
The following are some common communication pitfalls that can have negative consequences for the acquiring company during that critical period.
- Assuming that branding the merger is not important because your bankers and attorneys didn't bring it up. Financial and legal advisers are often focused on closing the deal rather than ensuring the long-term viability of the newly merged brand. Communications as an afterthought - weeks or months into a merger - can be detrimental. Many companies think branding a merger involves simply changing the logo, stationery and sign on the building. But in the government contracting world, where security clearances are in great demand, it is particularly important to communicate the combined capabilities and offerings of the new entity under a cohesive and differentiated brand, and factor brand transition into the overall communications strategy.
- Underestimating the importance of communicating with employees. Employees are your best brand ambassadors because they are the daily face of the company at customer sites and with industry peers. Consequently, employee communication is a major element of any acquisition plan. Employees invariably speculate in the absence of transparent dialogue with managers, which can negatively affect morale and productivity, create a poisonous environment, and lead to an exodus of the company's most valuable assets. After all, you lose the intended competitive edge if your talent slips away to the competition.
- Issuing inconsistent messages from the executive team. Consistent messaging that drives home the benefits of and reasons for a merger creates a groundswell of perceived acceptance and encouragement from the top. Middle managers will likely be the first source of information for employees with concerns about the change of ownership, so it is important to foster open dialogue between senior and middle managers to ensure that key facts and messages trickle down through the ranks. In other words, develop consistent messages that will clearly define the benefits to employees, and then communicate them to senior and middle managers in a timely manner.
- Using a tactless, scattered, inconsistent or silent approach when there's "bad news," such as layoffs or a change in benefits. Transparency is crucial to preventing stakeholders from jumping ship when presented with bad news, and it is particularly important for public companies. It's essential to reassure all internal audiences with honesty and integrity, and never forget to speak to their immediate concerns about the impact on their jobs.
- Missing the opportunity to capitalize on the excitement of the new merger for all audiences. For private and public companies, acquisition are perfect for publicizing good news, stimulating employees, building value and telling the world what the new entity is all about. Wait too long and your audience will lose interest. Do too little and your momentum will be short-lived.
Bill Hoover, president and chief executive officer of American Systems, is highly regarded as a change-management agent. Shortly after taking the helm at American Systems in 2005, he quickly launched an integration strategy for several of the company's previous acquisitions that had been operating with disparate brands and cultures.
"We realized that we needed to minimize the fear factor associated with these acquisitions," Hoover said. "And what people fear most is the unknown. So we developed a comprehensive communications plan centered on transparency and visibility."
As part of the plan, Hoover visited each affected office location to present the company's strategy. He also met one-on-one with local leaders and everyone most affected by the integration.
"These communications were open and honest," he said. "Both the good and the bad news was communicated personally and directly, and more importantly, each individual who was negatively impacted was treated fairly and consistently."
He delivered the message face-to-face and answered questions. Combined with other frequent communications via other media, American Systems kept the information flowing freely and kept its employee-retention rates from slipping.Evangelize the merger
Getting the positive merger story out to all key audiences takes strategy and tactical planning.
"Many mergers and acquisitions never reach their expected potential because of cultural differences between the business entities coming together," said Ray Bjorklund, senior vice president and chief knowledge officer at market intelligence firm FedSources. "Thoroughly communicating the M&A strategy to each stakeholder is a necessary early step in realizing the merger's expected potential and achieving enhanced competitive advantage."
To implement a strong communications program, you must:
- Identify key stakeholder audiences. It is important to accurately identify and address the concerns of all relevant parties, including current and potential employees and customers, investors (industry and financial), business partners, the media, analysts, professional associations and industry peers.
- Develop consistent and honest messaging. Powerful messaging should be targeted to all audiences and focused on their concerns. Important messaging themes include continued commitment to customer service, the diverse and unique capabilities of the new single entity, the synergies of the two companies, and what will and/or will not change as a result of the merger.
- Establish a branding outreach program. Marketing communications and public relations tactics are invaluable when it comes to telling the M&A story. Direct mail, carefully crafted e-mail messages, corporate newsletters, press releases and intranets are all effective and unique ways to reach key stakeholders with customized messaging. Another great channel for targeting a wide range of audiences is industry trade publications and mainstream news outlets.
- Plan an executive road show to key offices. The chief executive officer is the face of the company, and hearing about the merger from the top goes a long way toward reassuring employees while dispelling harmful speculation.
- Educate on-site employees and the business development team. Employees' day-to-day interactions with customers at federal agencies can make or break a merger. Make an investment in educating and arming those employees with the facts and key messages to help them evangelize the merger on the front lines.
Although communication is often an afterthought to the legal and financial details of a merger, it can be the linchpin to the merged company's success. Evolving your merger communications strategy before and after closing the deal can alleviate chaos and uncertainty and set the stage for a successful integration.Larry Rosenfeld (email@example.com) is founder and CEO of Sage Communications, a public relations and marketing communications firm in Vienna, Va.