Mergers and acquisitions (M&A) are key drivers of growth for many companies around the world and can significantly impact how a company is valued by investors and equity analysts. While ‘The Street’ (institutional investors and equity analysts) is often the primary audience considered when drafting M&A messaging, IROs can help drive a more integrated messaging approach to meet the needs of other important stakeholders such as media, customers, partners and employees, while ensuring materiality requirements are met across the board and a consistent message is delivered.
Review of Part One
In part one of this article, we reviewed how a lack of understanding of the benefits (and challenges) of a deal can have a potentially detrimental impact on a company’s stock, while a well messaged deal can bring greater understanding by the Street and potential upside to a company’s stock.
We discussed the importance of clearly communicating the strategic importance of the deal, answering questions regarding how it furthers the company’s operational and financial strategy, and how it helps the company grow operationally, financially and strategically, while tying the deal's strategy clearly to the company's overarching growth strategy. In other words, we emphasized the importance of ensuring companies don't adopt a myopic view of an acquisition, focusing solely on the benefits of a standalone acquisition without tying it to the broader company growth strategy.
Also covered were key metrics the Street uses to value the deal, both from an additive revenue perspective and debt/share issue perspective, which the IRO should keep in mind when preparing messaging and senior management. Also reviewed were numeric and non-numeric metrics for success that the investment community uses to value the success of a deal, which IROs need to be aware of and ready to address.
Along with reviewing the most appropriate tools to use (e.g. when a deal warrants a conference call), the importance of Street engagement upon announcement of the deal was also stressed, as reaching out to equity analysts and top holders to ensure they have full understanding of what the company has announced is imperative to properly valuing the deal and the stock.
Part Two: Leveraging the IR message for the Broader Stakeholder Group
As mentioned, there are other groups that will be affected by the acquisition announcement; thus it is important to ensure that specific messaging for these groups is created. This should stem from the messaging developed for the investment community, for two reasons: first, the IR message has likely already met rigorous disclosure review and been approved by the legal teams of both companies (acquirer and target) as well as the management teams on both sides; and second, leveraging the IR message will ensure consistency in all messages.
Media
Messaging for the media often most nearly resembles the IR messaging. Working closely with your own PR department, consider drafting a holding statement for management that covers the top strategic reasons for the deal, as well as some basic facts about the target company, including where it is based, how many employees it has, its revenue size and, depending on where you are in the deal process, high level information on how the deal will be financed. This should very much echo the IR message.
If you're announcing a deal with another publicly listed company, there may be several hurdles to get through before the deal can close, including anti-trust and competition law approval in certain countries and a shareholder vote. If the deal hasn't closed, the acquiring company doesn't own the target company yet. Accordingly, there will be very little that you can legally say about the deal, other than some basic facts. Your legal team will be key to ensuring you're disclosing only what you can. Also, it's best to work with the target company to ensure that its team is aware of what you will be saying to the press. Share your holding statement with the target’s communications team and request to see any material the company is publishing. Also, both companies should decide who the spokespersons will be – whether just from the acquiring company or from both companies.
Ensure that IR and PR departments of both companies have full contact information for all spokespersons so they can properly direct inquiries. If you have presentations posted and/or a conference call/web cast for the announcement, be sure to send reporters these materials on a timely basis, ahead of any interviews, so that they are prepared when speaking to management. The holding statement and press release should be leveraged for online and social media messaging/postings.
Customers
Acquisitions can make customers nervous and can directly affect buying decisions. Companies should consider issuing direct and personalized communications to their customers after the press release has been issued. The communication might be in the form of a letter to customers from the company's CEO or head of sales. The target company may also adopt similar messaging. The communication should summarize the announcement, including the rationale for the deal, again leveraging the approved IR messaging. Specific language (or more detail) might be incorporated in terms of product/service/delivery enhancements expected from the acquisition that should benefit the customer (depending on where the deal is in the process).
The timing of the deal close should also be very clearly communicated and is often a main point in the original IR messaging. Customers will also want to know if the products/services they have from the acquiring company will still be offered and the timing of potentially new, integrated products/services. Many of these details will not be available to disclose if the deal has not yet closed and you'll need to indicate that this information will be available once the deal closes.
Companies should also reassure customers that their current customer representatives will remain the same. If this is not the case, provide as much information as possible. In addition to letting customers know where they can find information about their representative, companies should point customers to the original announcement (press release) and any other related resources that have been posted publicly.
Partners
Strategic partners also need to be informed of the acquisition announcement and assured that there will be no disruption to their existing business with either company. Drawing on the original IR messaging and customer messaging, communicate the drivers for the acquisition – to the extent legally possible, depending on where you are in the deal process – while pointing out how much the company values its partnerships and doesn't foresee any disruption in services. If there is an anticipated change to the structure of partnerships, provide as much information as you can. Let partners know where they can find more information and whom they can contact.
Employees
One of the most important audiences in any acquisition transaction is the employees of both companies. Drawing on the original IR messaging regarding the rationale for the acquisition, the company may want to develop a frequently asked questions (FAQ) document that addresses employees' concerns, such as whether their jobs, salaries or benefits will be affected, managers will change, or office closures are planned. The FAQ document should include human resources contacts for employees who are not comfortable approaching their managers. This document should be made available to all employees via the corporate intranet.
Town hall events are also a good idea. This usually involves executives of both the acquiring and target companies traveling to the major offices of the target company and jointly presenting to employees the rationale for the transaction. This allows employees to hear directly from their potential future management with the comfort, support and presence of the existing management team. It also fosters a sense of greater cooperation and comfort between the companies and enables employees to ask questions of both management teams. The acquiring company should do a town hall for its employees to ensure they are aware of and comfortable with the deal and encourage them to work closely with their new colleagues and make them feel welcome upon the close of the transaction.
While the investment community is IR's primary audience for M&A messaging and communications, IR can and should play an integral role in ensuring the broader community of stakeholders is also addressed.
Sonya Mehan is an investor relations consultant.