Best Practices for Communications During an M&A Transaction

A big component of a successful M&A transaction is identifying and minimizing risks. Do not overlook the risks associated with how communications are handled. You risk sinking a deal if this is not executed well.

Recently, I spoke about this with Joe Hellerman on The Transaction Abstract podcast. Joe is the Advisory Services Practice Lead at Redpath and Company and a respected thought leader in the M&A space.
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Guiding communications from either side of an M&A is a core strength of Padilla.

During a transaction, both sides aim to reduce their risk through their own form of due diligence. Poor communication introduces significant risk factors that undermine these efforts. Misinformation can destroy the expected value or complicate post-deal integration.

With that in mind, communication should be integrated into M&A transactions from the earliest stages. Both buyers and sellers need to rethink the value of corporate communications. By getting them involved early, you manage risk in four areas.

Risk #1: First Impressions

How will employees react upon learning about the impending transaction? Quick judgments and emotional responses are a part of human nature when unexpected news arrives. In an M&A context, employees worry about their job security, work environment, and future within the transformed company.

If employees perceive the news negatively, it can depress morale, productivity, and engagement—at a time when you need people focused on producing and providing value. Years of work go into most M&A deals, but employees respond to them in a matter of minutes!

Managing this risk means providing employees with the information they need early in the transaction. Communications should be clear, concise, and transparent. This mitigates uncertainty so personnel have a better understanding of the rationale underlying the transaction.

Risk #2: Message Control for Buyers

As a buyer, you have every right to control all dimensions of the communications around the acquisition. It’s important to get corporate communications involved early so key personnel can develop insight into how the communication structure works within the target organization.

That includes knowing what kind of information employees get and how frequently they get it. If they are likely to be taken by surprise by the information, it may not be well-understood or embraced. It’s impossible to gain those insights in a short time, so a longer runway is crucial.

Confusion, rumors, and misinformation spreading among employees can undermine your transaction. It can also be difficult to monitor or prevent. Buyers may have more control over the messaging, but outcomes are best when both sides coordinate to minimize disruptions and maintain morale.

To streamline this, establish a single source of truth—such as a website—providing periodic updates on the status of the transaction. Involve corporate communication experts from the start to craft a messaging plan.

Risk #3: Audience Sophistication

Businesses typically have a wide variety of stakeholders. Each one has their own level of sophistication in understanding the M&A transaction. Each stakeholder may also come with a preconceived bias to whether M&A will benefit or hinder their interests.

To give one example, employees at public companies may be more accustomed to navigating complex financial information, in contrast to those in closely held companies who rarely review enterprise-level financials. M&A communications should be tailored to maximize understanding from the audience involved.

Before issuing communications, be sure to identify the key points all stakeholders, regardless of background, should take away from the message. Confusion and disengagement arise when employees are overloaded with technical or irrelevant details. Plain language and pertinent context are essential to success.

Risk #4: Communications Channels

This risk arises from over-reliance on digital communication methods. Email and social media disseminate large amounts of information effectively for a general audience but should be tempered with personal interactions that provide a sense of empathy toward employee concerns and foster trust.

Helping employees feel supported and heard is a core goal of M&A communications and is largely a function of your communications mix. Consider the best ways to incorporate face-to-face interactions, town halls, and even direct supervisor involvement as a hedge against employee skepticism.

The Emotional Weight of M&A

Uncertainty can weigh heavily on employees during M&A. This emotional weight is also based on risk—risk of job loss, culture changes, and an unknown future. By recognizing and addressing these emotional aspects, you lay the foundation for effective communication.

Discretion vs. Communication

Confidentiality is imperative to an M&A process, but it can be maintained without leaving communication tools on the table. Corporate communications should be used proactively from the start. This ensures employees are ready to pull in the same direction when the deal closes, controlling the execution risk that follows.

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