Managing the team spirit of an organization during the M&A deals becomes a real challenge for leaders who, if not properly managed, can turn a business into chaos. This article will present several tips and approaches to announcing an acquisition.
The number of mergers and acquisitions is on the rise
Organizations are constantly evolving, adapting to market changes and the needs of their customers. Mergers and acquisitions are among the biggest organizational changes. Tax reforms, the specifics of the regulatory climate in different countries, and growing cash reserves reinforce the optimism among large international companies that the M&A trend, which has been going on for many years, continues. According to Deloitte US’s 2019 annual survey, 79% of respondents expected more deals to be closed over the next 12 months, up from 70% in 2018.
M&A allows companies to grow quickly and successfully, opening up new prospects for strengthening strategies and creating improved business models, unique product portfolios, and innovative industries. However, along with several seemingly obvious commercial advantages, companies face serious internal difficulties.
Why does the success of the deal depend on its announcement?
Uncertainty about a company’s future decisions signals a risk to employees. Here is a snapshot of the main emotional and behavioral reactions that we identified while working on one of the communication projects, the purpose of which was to support the company in the M&A transaction process:
- Fear for the future in a new company;
- Rumors are constant companions of any changes;
- Distrust of the leadership team and immediate supervisors.
How to announce the acquisition?
Traditionally, the M&A process began with a public announcement of the intention to complete a deal to acquire one company from another. It is the first opportunity to explain to all employees the strategy and prospects for the acquisition. How well this stage is done can significantly neutralize the destructiveness, and an open and clear explanation of the acquisition process ensures positive interaction between employees with each other and with their managers. The main concern is to ensure that the correct deal messages are sent in sequence.
The offer to the target’s shareholders is usually made through a public announcement, such as a newspaper advertisement. However, this method is rather typical because, in this case, the names and addresses of all shareholders are required, and it is not easy to get such information against the target’s wishes. As a rule, company executives prefer to delay the announcement of an upcoming merger and acquisition to better work out the transaction’s structure and avoid organizational losses. However, if the target company is public, there is a risk of insider trading on the news of the upcoming merger. Allowing insider trading may lead to an overestimation of the company’s value, which is beyond the interests of the company that initiated the merger. As a result, company leaders are under pressure from opposing environmental factors.
The communication approach in the process of acquisition announcement is based on three components of effective interaction with the team:
- Stages and sequence of communication. A well-designed action logic, based on the key tasks and focus corresponding to each stage, ensures smooth communication and keeps all parties involved in the process before, during, and after the transaction.
- Shaping attitudes through messages. The emotional attitudes we form in people’s minds allow us to create a secure, comfortable environment for work with a high level of motivation.
- Transparency and openness. It builds trust within the organization, discourages rumors or speculation, and helps people adapt to change less traumatically.