Despite market fluctuations, the pace of mergers and acquisitions has been frenetic in the U.S. for nearly two decades.
Whether it’s private equity, financial services, the food industry, healthcare, industrials, telecommunications, oil and gas, utilities, high-tech, Internet, or social media, consolidation in most major market sectors continues at a torrid pace.
For 2010, the last full year measured, Thomson Reuters reported a 14.2 percent gain in U.S. M&A activity for a dollar value of $822 billion. Recently, USA Today reported that U.S. activity is running at a $1.6 trillion pace this year. This is still below the peak of $2.6 trillion in 2007, but still qualifies as an active market.
In my view, one of the biggest factors in the success of M&A deals is the execution of a strategic communications plan that describes and positions the transaction appropriately. Without this roadmap, it’s extremely difficult to articulate the deal to critical audiences -- employees, shareholders, the general public, and the diverse audiences associated with a corporate merger. Therefore, it is critically important that the business rationale supporting the transaction be concise and cohesively communicated.
To strengthen a successful M&A deal, the parties involved need to make strategic communications a driving force. Senior managers, lawyers, investment bankers and consultants involved in deal-making should formulate a 10-step process to ensure the adoption of a strategic communications plan before the deal is announced.
Here’s a checklist:
Step 1: Evaluate the corporate reputations. Components include ethics, workplace environment, financial performance, leadership, management, social responsibility, customer focus, quality, reliability, and emotional appeal. Develop a matrix and rank each component on a scale of 1 to 10.
Step 2: Investigate major issues/concerns. Conduct Internet searches going back five years and review news media coverage for major corporate events involving both parties. This ensures that when the transaction is communicated, senior management will be prepared to address any negative issues that surface.
Step 3: Establish communications goals. Define and establish the goals of your strategic communications efforts. Determine what you are trying to accomplish and agree on the three or four most important communications goals in the process. Without these agreed-upon goals, each entity may move in opposing directions, which will add confusion to the deal.
Step 4: Define relevant audiences. During the early planning stages, it’s critical that every audience affected by the deal be defined. This list typically includes employees, Wall Street analysts, institutional investors, stockholders, customers, business partners, distributors, political leaders, regulators, and trade associations.
Step 5: Establish positioning strategy. Any way you look at it, two different organizations are joining forces. Whether it’s a friendly merger or a hostile acquisition, the new entity will need to create a positioning strategy, clearly defining how the combined entity will be perceived by its audiences and how it will execute its business strategy and plan for growth.
Step 6: Agree on messages. Building off the positioning strategy, agree on three to five key messages to be incorporated into all internal and external documents. If, for example, the merger of company X and company Y is going to create the largest player in its industry, you need to emphasize this in all communications. It sounds simple, but agreeing on key messages can be difficult. If the M&A activity involves a hostile takeover, specific strategies should be developed to address potential issues in the public domain.
Step 7: Select and train spokespeople. This area often breaks down. Once the deal is done, too many people tend to communicate different and inconsistent messages. Today, audiences quickly assimilate information from multiple sources and form immediate opinions. Keep the circle of spokespeople small, and make sure they stay “on message”. Appoint and train specific individuals to disseminate messages internally and externally.
Step 8: Utilize social media. It’s unrealistic to announce a deal today without using social media. Gone are the days when dealmakers could rely on the print and broadcast news media to announce M&A activity. At the time of an announcement, the organizations joining forces need to use (at a minimum) Facebook, Twitter, YouTube, and Linked-In. These are the modern channels that feed news to key audiences. In addition, a social media crisis communications plan needs to be developed if events don’t go as planned on the social media front.
Step 9: Synchronize communications. Devise a detailed blueprint and timetable to implement your communications strategies. This requires well-defined plans with specific communications responsibilities assigned to the appropriate individuals. Both sides need agreed-upon documents to guide the process, such as key messages, talking points, and a Q&A. There must be a coordinated game plan in place to anticipate and answer every possible question. In today’s high-stakes communications environment, there is no margin for error.
Step 10: Plan Immediate Measurement. Once deal communications are launched, the parties need to implement qualitative and quantitative measurement. New software tools can analyze news media coverage and social media channels. Research can also be conducted among employees to determine if the correct messages are being transmitted. Don’t rely on anecdotal evidence.
In conclusion, senior executives involved in M&A activity must understand that announcing the deal is the beginning of a long-term communications challenge. If a well-conceived and executed strategic communications plan is undervalued and underestimated by the parties involved, it will have a detrimental impact on a successful transaction announcement and subsequent communications initiatives.
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Richard E. Nicolazzo is management partner of Nicolazzo & Associates, a strategic communications and crisis management firm headquartered in Boston, Mass.
Joe M. Grillo, a partner at Nicolazzo & Associates, contributed to this blog.