KEY POINTS:
A contributing factor to many mergers and acquisitions not delivering their promised benefits is companies underestimating the scale and urgency of communications needed in the final and most important phase.
Everyone loves the thrill of the chase, the adrenaline rush of the dawn raid on the share register
and the champagne party which accompanies a consummated deal. The importance of communication is generally well respected and adequately financed during this stage, but afterwards?
The deal may be done, but the need for effective communications is now paramount if the merged companies are to deliver the promised outcome - remembering that every share price rise during the offer period makes the subsequent performance mountain higher to climb.
Forecast turnover and profit increases, the proceeds of disposing of certain assets and merging others, closing factories, shifting manufacturing, brand and product changes, economies of scale - these are all outcomes that look encouraging on a rosy-hued spreadsheet.
But what of the human response to these planned changes, often barely considered, yet possibly the most telling factor in whether a merged organisation fulfils the promises made?
Most takeovers have four distinct communication phases:
* The evaluation of a proposed offer: strengths and weaknesses, support and opposition - a scoping exercise to determine issues and the degree of difficulty.
* Development of an appropriate strategy, action plan and communications material.
* An intense campaign lasting several weeks and sometimes months, and generally contested by the target company.
* A communications programme to meet the needs of stakeholders of the newly merged organisation as soon as possible.
All too often, however, as soon as the deal is concluded, communication expenditure is cut along with many other costs, as management rolls up its sleeves and attempts to deliver on the performance forecast for the merged organisation, and the fourth phase is not implemented. This flies in the face of reality. The fact is, worldwide, most mergers and acquisitions fail to achieve the promised results.
It's a rather empty prize winning "the campaign" if the merger benefits can't be realised, not to mention damaging to reputations, staff morale and enterprise value. Damaged credibility can also make it harder to do the next deal.
Many factors can prevent the promised outcomes being achieved. Synergies can be be more elusive than thought, particularly if the merged organisation covers more territory or cultures.
The wrong people might leave. Animosities can develop during a hard-fought campaign, making staying unpalatable for some. Those departing may take other valued people - and corporate knowledge - with them.
Staff morale in the "losing" company may be low and an "us" and "them" culture can take hold. At the same time, other stakeholders - customers, for example - may re-evaluate their options.
Change produces winners and losers and you need to identify these and work to convert as many stakeholders as possible to the "winners" side of the ledger.
There is no special magic about what needs to be done immediately a merger is certain. It's obvious that major effort must go into a sustained communications programme, particularly with staff, to bring two organisations together into a single team committed to new goals. This process needs to begin as soon as the merger or acquisition takes effect.
The sustained campaign must also meet the information needs of other stakeholders, who need to see the merger positively and respond accordingly, if there is to be a successful outcome.
The communications effort needs to be well resourced and given a high priority. In a fast-changing situation, many communications opportunities will be present only briefly. You don't get a second chance to make a good first impression, as someone once famously said.
Without adequate, timely information, presented appropriately, stakeholders do not stay stuck in neutral waiting for management's pronouncements and interpretations of events for long. They do what all people do in a time of change. They form opinions on where their best interests lie and act on them.
Success in this crucial fourth phase of merger communications will hopefully consist of reporting that all of the promised benefits are on track to being realised, with market research confirming positive relationships between stakeholders and the merged entity.
The success of mergers and acquisitions depends on many factors. Communication is just one of them. But it may be the one that makes the difference in the end.
* Cedric Allan is a director of Star Public Relations in Auckland.