Communication strategies in mergers and acquisitions
By Goke Ilesanmi
The concept of mergers and acquisitions has long been considered one of the fastest routes to business growth. Yet, experience has shown that most mergers fail to achieve the expected synergy and are more often counterproductive at the end of the day. Post-merger integration challenges are many. Even though nobody expects structural changes occasioned by mergers to be so smooth, there are appropriate strategies that can be put in place to ensure that the integration process is carefully managed to limit disruptions and achieve synergy so as to exceed the expectations of all stakeholders. One of the strategies for achieving successful mergers or acquisitions is effective communication.
Communication needs to begin during the preliminary stage of the merger or acquisition to set the tone for success. Too often, communication does not start until it is too late. Research shows that mergers and acquisitions go through three broad phases. As part of an AT Kearney global survey conducted in 1998 to 1999, the question, “Which phase bears the greatest risk of failure?”, brought the following response: Strategy development, target shortlisting, due diligence – 30%; Negotiation and closing the deal – 17% and Post-merger integration – 53%.
This response shows that the most important time for a merger or take-over is when the deal has been formalised and the more difficult stage of “bedding down” the process has started, thus requiring intensive communication. However, there is a case that communication should start early to pave the way for internal acceptance and post-merger integration. Overwhelming experience indicates directly or indirectly that people issues are the main reason for take-over failures. And communication is still central to the people issues. According to McKinsey’s studies, “Management of the human side of the merger is the real key to maximising the value of the deal.” Watson Wyatt Worldwide says cultural incompatibility is consistently the biggest barrier to integration. But Mercer Human Resource Consultants’ discovery is that out of three key merger factors – people, processes and systems – only people issues made a difference to the success of mergers in the decade to 2001.
Effective employee or internal communication is the first or second most important issue emerging in all studies of mergers. Internal communication and culture changes are identified as the hardest to achieve, but the most important in merger success. Tragically, they are generally under-resourced in post-merger integration, and are often absent before the deal and the due diligence phases. Interestingly, customer issues are also extremely poorly resourced.
At this analytical juncture, the questions to ask are, “How could management handle the situation?” and “How could highly-paid management consultants let this happen?” The two most important constituencies to look after – customers and employees – have largely been ignored. And the reason for this defies logic. Most of the merger communication budgets around the world have been spent on external communication rather than employee or internal communication.
Regardless of the brilliance of the vision and the fit in a merger, the subsequent success of the deal depends mostly on the employees. They are the ones whose day-to-day actions can make a merger work or collapse after the deal has been sealed. Sufficient investment in internal communication is the link in keeping the employee attitudes positive towards the changes brought about by the merger.
Early communication
Even before a formal merger or acquisition is underway, employees often become aware from indirect information or by chance that something is underway. It is human nature to be inquisitive. If they feel management is keeping information from them, quite understandably they start to feel anxious.
When people are uncertain, they start speculating about the clues in front of them. Invariably this interpretation of clues becomes paranoia as they chat with colleagues and quickly have the impression that the management is conspiring to catch them unawares. The grapevine goes overtime with rumours. Productivity will begin to drop as staff waste time in discussing rumours and losing the steam of their motivation. With well-developed rumours, some staff will actually start leaving the company before the “bad news” is broken to them.
Initial indifference
Research shows that when a merger is announced, the staff in the acquiring company may not feel concerned initially. They belong to the new parent and do not anticipate much change. This sense of security is not always justified because the process of establishing the new joint organisation can reveal areas of the acquiring company that could be improved upon. However, if two roughly-equal parties merge, change will hit both sides. Employees will become anxious about their jobs. They will suddenly have to confront loss of status and influence; uncertainty about the employers’ plans; a fight for individual survival as fear of job cuts catches them; increased workloads because some people leave voluntarily or involuntarily; a spillover effect into individuals’ lives.
It is a truism that effective or strategic communication plays a key role in addressing these issues, but it is difficult and complex. This is because communication demands intensive time from senior management at a time when they may be totally devoted to the technical and financial aspects of the deal, and may not have sufficiently considered the impact on others. Often the skill of effective communication requires training because many managers have never received guidance on good interpersonal communication practices.
To be continued
GOKE ILESANMI (FIIM, FIMC, CMC), CEO of Gokmar Communication Consulting, is an International Platinum Columnist, Professional Public Speaker, Career Mgt Coach and Certified Mgt Consultant. He is also a Book Reviewer, Biographer and Editorial Consultant.
Tel: 08055068773; 08187499425
Email: [email protected]
Website: www.gokeilesanmi.com.ng
