Hearts & Minds: Merger mania needs careful comms

As the year ends, so there is a flurry of mergers. What buyer and seller must understand is that however compelling they think it is; the success of their marriage can make or break at announcement.

Think of it like a wedding: the first intimation that everything may not be so hunky dory often comes at the reception, with the speeches. Looks are exchanged across the tables and afterwards guests speculate as to how long they give it. M&A is the same. The guests are the stakeholders, all of them. 

Research says so. A Harvard Business Review study found that 60% of quoted deals were met with negative market reaction. “These major capital investments have odds of success less than a coin flip.” In general, the 40% that were welcomed were viewed positively 12 months later, whereas two-thirds that received the thumbs down were in a worse place. 

Prepare. Start planning the comms during due diligence –treat it as part of that process. You’re examining the fit, soon you may have to make the identical case to all stakeholders, to investors, employees, partners and customers. 

Presentation matters. Acquirer and acquired must both exhibit thought and care. It’s not a moment for throwaway lines; the tone and expectations raised are vital. 

Until now, everyone else has been in the dark; you may know it backwards but they can only go on what they’re told. Exude confidence in what’s being unveiled, that you understand and have explored the ramifications. 

The strategic logic must be sold as better than the now, demonstrate how the new company will beat existing expectations. The buyer may also be shocking investors by paying a premium. It must be linked convincingly with the afterwards, with the strength of the new business. Fail to convince, and the market will seize on the ‘true value’ of the deal and mark it down. 

Be careful, don’t get carried away: keep the targets reasonable; talk of huge gains to be made from synergies will likely be red flagged by investors as unachievable and by staff as terrible. Think of the latter - they’ve been hit with uncertainty. They will want to know quickly and honestly how they will be affected. Start by showing you’ve got the top management team and key reporting lines in place - a vacuum will only add to their anxiety. 

This is about selling a vision and a plan. Get it right and you will win.

Chris Blackhurst is one of the UK’s foremost business journalists. He was previously Editor of The Independent and City Editor of the Evening Standard.