Mergers & Acquisitons: Communication on the Gold Scale
Communication is particularly complex when many stakeholders are involved. A prime example: mergers & acquisitions
German companies are in high demand: The number of mergers, acquisitions and equity investments by foreign companies alone more than quadrupled to 1707 transactions in 2016 year, according to Germany Trade & Invest.
One Soup, Many Chefs
When companies merge, the interests of numerous stakeholders come together. This is true not only in the case of hostile takeovers, but also when the management of the acquired company supports the merger. The list of potential stakeholders and opinion leaders is long: it ranges from the customers, employees and shareholders of the companies involved, to analysts, journalists, industry associations and trade unions, to regulators and political representatives.
They all try to assert their interests in the takeover process and also, and increasingly, professionally use the media stage to do so. For companies in an M&A process (mergers and acquisitions, or M&A for short), it is becoming increasingly difficult to gain and maintain communications sovereignty over a transaction. In this context, the early involvement of those responsible for communications and the development of a clear communications strategy is a decisive factor for success. Today, many companies rely on external consulting to successfully manage the exceptional situation of a takeover.
Especially important: clarity and proactivity
A targeted, stringent and proactive approach to key stakeholders can significantly minimize friction and conflict in the takeover process. For example, employees and works councils will publicly oppose takeovers if they fear for their jobs. Their protests, in turn, often lead to political intervention. An important communication goal is to avoid productivity losses as a result of employee uncertainty. Professional M&A communication also helps to positively influence the share price of one’s own company and pays dividends for the company’s image.
In addition to a thorough stakeholder analysis, the communicative preparation of a takeover process also includes the development of target group-specific messages for all key stakeholder groups. The strategic motives for the merger must be explained, as must the impact on employees and sites. Timely “framing” of a planned takeover is crucial in order not to lose control of the interpretation of this process. When implementing such a communications strategy, very good media networking is particularly important.
Communication in an M&A process poses particular challenges for the companies involved. The difficulties lie above all in the strong legal regulation of corporate takeovers, which affect listed companies in particular. For example, Section 33 of the German Securities Acquisition and Takeover Act obliges the Executive Board to remain neutral between the submission of a takeover bid and the outcome. The strict rules against insider trading, on the other hand, force companies to publish all potentially stock price-relevant information on the capital market without delay. However, the need for information on the part of employees and many other stakeholders is particularly high in the first weeks and months after the announcement of a takeover. But until “closing”, i.e. the legally binding conclusion of the takeover, every statement made by the management must be weighed on the legal gold scale.
It is therefore all the more important that these challenges do not lead to a public silencing of the company’s management. After all, fierce media disputes and strong public pressure have caused many a transaction to fail or to drive up costs. That’s why companies need advocates and a clear communications strategy – both internally and externally. If you leave your stakeholders in the dark, you encourage fears, speculation and rumors that can develop a dangerous momentum of their own.