Developing a Merger and Acquisition Communications Plan
Negotiating a merger or acquisition can be all-consuming for a company’s management team given the complexity of such deals, and the stakes involved. These transactions can be as transformational as an IPO — more so, in some cases.
But even the very best merger or acquisition can fall apart if the management team doesn’t also develop a strategic communications plan to inform the outside world about what they’re doing and why they’re doing it. This cannot be an afterthought. Time is of the essence.
The primary objective is to explain why the deal makes sense. The involved parties need to articulate why it is worth taking on debt, depleting cash, disrupting business, and assuming risk, among other considerations. The presenters need to answer why the transaction is superior to pursuing growth organically.
The plan will be used to communicate with various audiences, such as shareholders, vested stakeholders, partners, suppliers, customers, and employees. I’ll focus on investors because for both public and private companies alike, they possess the power to send valuations plunging and even kill the deal.
1. Remember what people are hungry for. The market has no taste for uncertainty. The Street needs information to shape its thinking about the deal. The more you offer regarding anticipated benefits of your deal, the more likely the market will react positively. Guidance may include projected revenue impact, associated expenses, anticipated timeline for accretion, and EBITDA expectations.
Try to keep this in mind when building a plan: There is a tendency, fueled by a powerful sense of optimism, to overpromise. Combining two companies is a little like remodeling a house. You don’t really know what’s behind those walls until you tear them down. Same with integration. Executives are likely to encounter issues that went undiscovered during due diligence. Consider dialing back those projections. Better to surprise on the upside than disappoint with delays or missed targets.
2. Assemble a team to develop the plan. The plan is a colossal undertaking — entirely too much work for one or two people. Recognizing the sensitivity surrounding the transaction, building an effective communications plan requires a tight workgroup. Possible members include the CEO, the CFO, general counsel, and a point person from the investor relations, human relations, and marketing departments. Banking and legal advisors should also be invited. And make sure to include people from both companies.
Including a representative from each of the departments involved also helps to ensure that the plan accounts for all of the various audiences.
Let me give you an example of what can go wrong when a single department completes the assignment on its own. I’ve seen it firsthand. In this instance, marketing spearheaded the communications, and while they turned out a truly compelling piece of work, their focus was primarily on why the deal would be good for customers. And while customers are obviously important, the plan must speak to everyone, addressing every constituency’s interests and questions, particularly shareholders if it is a transaction that will need their approval to move forward.
3. Develop a timeline to get the job done. Have you ever noticed how often assignments without deadlines die? That’s why you must formulate a timeline and hold everyone in the working group accountable. An enterprise of this scope can easily get away from a team unless all participants fulfill their responsibilities on time. Depending on the size of the deal and the constituencies that may be effected, the communications piece could take anywhere from 30 days to many months to complete. All of that said, you and your acquisition partner are in control of the roll-out. If more time is needed, try to take it. What’s most important is getting the key messages exactly right.
When developing the timeline, be careful of drawing too heavily on what went into preparing a previous IPO communications plan. The two projects do have much in common, but they also have important distinctions. First, with an IPO, a company’s goal is abundantly and unambiguously clear: to raise money. Not so with a merger or acquisition. Second, there are more people involved. At IPO time, it was just your team. At M&A time, there are two teams involved, provided the proposed transaction is supported by both entities. Bottom line: this effort has more layers and might take even more time.
4. The plan should be comprehensive, speaking to all audiences of both companies. It should direct as much as possible the key messages that drive what each company says, writes, and otherwise expresses about the deal. That includes your websites and social media channels, which should be updated as soon as possible. It should also be flexible enough to accommodate distinct audiences without being fundamentally altered for each one. You want to maintain consistent, if not the same, messaging across all of your audiences.
An outside partner with deep experience in M&A communications planning can help you establish a realistic timeline, remain on track, create a plan with precise messaging, and roll it out. We’ve worked on countless plans and would be happy to have a deeper conversation about your companies’ communication needs.
ICR Westwicke is the largest healthcare focused investor relations firm in the country. We provide customized investor relations programs and independent capital markets advice to small and mid-cap healthcare companies.
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