When Monsanto announced plans to merge with Pharmacia & Upjohn last December - topping off a record year in which M&A activity reached the $3 trillion mark - reporters
went straight for the jugular. They wanted to know how the company's agribusiness would fit into the new entity's business strategy as a major pharmaceutical player. Apparently,
media pundits were less than satisfied with the soft answers they got. The resulting coverage was critical, and shares in both companies fell following the merger announcement.
Today, the financial community remains skeptical about the long-term viability of the deal, which is slated to close in the second quarter of 2000.
Every merger is a media relations crisis to the extent that reporters, as "key influencers," often set precedents in shaping the perceptions of other stakeholder groups. The
press can make or break your corporate reputation at a time when your identity is in a fragile state of metamorphosis. And the latest news on the news isn't good. Researchers
in GCI Group's corporate practice recently studied six global mergers in 1998-1999 and found that negative news coverage of the deals outweighed positive coverage by nine percent,
with 25 percent of negative articles at least partially focused on corporate image/reputation issues. (The study found that 41.7 percent of reporting focused on negative issues,
vs. 32.7 percent skewing positive, and 25.6 percent neutral.)
Announcement day is often the watershed moment that defines how merger news coverage will pan out in the weeks that follow. "When a merger is announced, that's when interest
in the company is at its highest," says Reid Walker, director of external communications for PSINet, an Internet service provider in Northern Virginia's tech corridor that has
acquired more than 65 companies in the last 14 months. (Walker also handled communications for NASDAQ's acquisition of the American Stock Exchange in 1998). "If you don't define
the merger and its implications, the media will do it for you, and it may not be what you want to hear."
Imagine, for example, the betrothal of two tech companies, in which one is a dominant player in a dying industry and the other is smaller, but operating in a high-growth field.
"The media perception may be that you're just merging more people into an old-growth company, instead of moving toward a new business model," Walker says. Positioning at such
critical moments is key.
Hitting the Window
Unfortunately, the compressed periods in which merger deals typically gel leave little time for message fine-tuning. When the dollar figures on the table are in the billions,
the challenge for communicators isn't getting media attention, it's warding off inquiries until the timing is right for the formal announcement. The bigger the deal, the harder
it is to contain the news and control leaks. Most negotiations involve dozens of investment bankers with strong ties to Wall Street - and savvy M&A reporters will make
friends with them, hoping to get the inside skinny.
"You have to be prepared to manage rumors and aggressive inquiries, and be careful not to respond to them before the announcement," says Ruder-Finn president Kathy Bloomgarden.
(Ruder-Fin handled corporate positioning for Novartis, the company formed by the 1996 megamerger of Sandoz and Ceiba-Geigy.) "If someone in the marketplace starts rumors, you'll
get a thousand calls - particularly in the hours leading up to an announcement," she says.
Timing isn't always something you can control, either. "I've been involved in deals that leaked out on Sunday evening, and others that got out on Friday night," says Walker.
"If the market is moving on a big rumor and you don't respond, NASDAQ's Stock Watch will call you. If they see a huge jump in your stock, they'll ask you to comment. And if you
say no comment, they may halt your stock." This is a point at which you must decide between a "neither confirm nor deny" stance and spilling the beans. "You either have to tell
nobody, or tell everybody," to comply with selective disclosure laws, Walker says.
Strategies Du Jour
Given a choice, most companies still prefer to break announcements during pre-market hours with a release to the newswires, although this is becoming less important with the
advent of after-hours trading, and the proliferation of international mergers that cross time zones. (J.P. Morgan reports that more than a quarter of all 1999 transactions in the
U.S. were initiated by non-U.S. acquirers targeting American businesses.)
What happens after the initial release is issued is a strategy many are now debating. When PSINet last month announced plans to acquire the IT solutions company Metamor for
$1.9 billion, communications counselors bypassed the rote press conference tactic and instead coordinated a phone conference of 900 industry analysts and reporters. Immediately
following the phone briefing, company execs conducted face-to-face interviews with major news organizations, followed by one-on-one phone interviews with other key journalists.
Pharmacia & Upjohn and Monsanto similarly eschewed the press conference route and fielded media inquiries by phone, directing reporters to the Web for more information
about their merger deal. "Most reporters prefer to get their information that way," says Scarlett Lee Foster, a Monsanto spokeswoman.
"Press conferences are falling out of favor these days," in b-to-b deals, says Walker. But they're still valuable in the consumer arena, he says, citing the AOL/Time Warner
announcement as an example of a worthwhile and well-orchestrated photo opp. "They had their logos plastered all over the place, and there were well-known personalities there that
everyone wanted to see." And - in what has become a near legendary move - Steve Case's suit, contrasted with Gerald Levin's out-of-character casual attire, helped reinforce the
players' careful positioning of the deal as a "strategic merger of equals," not a takeover.
(GCI Group, 212/537-8140; Walker, 703/904-4100; Bloomgarden, 212/715-1564; Monsanto /Pharmacia, 314/694-2883.)
Merger Talking Points
Crunched for time? To the extent that generalization is possible, here's what reporters will want to know first:
- The financial terms of the deal.
- The rationale behind the merger - why it's good for business and shareholders.
- How the merger will affect the company's market strategy - where the new entity will rank and what categories it will fall under.
- Whether there are layoffs or corporate relocations on the horizon (local media).
Local Reporters Shape Community Relations
During a merger, think of local media as community representatives, and treat them accordingly. "Often when companies merge, one headquarters gets lost," notes Jack Bergen,
president of the Council of PR Firms.
"When this happens, much of the acquired company's philanthropic work gets dropped because the company attention shifts to wherever the new headquarters is." When charities
lose the community support they've had for generations, the issue becomes a lightening rod. The community feels abandoned. Employees who once took pride in their company's
outreach efforts feel embarrassed. And if the company downsizes after a merger, there are economic development problems.
Bergen's suggestions for community relations priorities on the day of the merger announcement:
- Schedule a meeting between your CEO and the mayor early on the morning of the announcement.
- Arrange for your senior officers to make courtesy calls to local government on announcement day, promising to follow up with more details in the weeks ahead.
- Ensure local nonprofits that they will not lose funding immediately. Maintain philanthropic commitments for at least a year, then gradually shift resources to other
communities where your newly merged company has more of a presence. In the interim, encourage other local businesses to pick up your obligations in the community.
(Council of PR Firms, 800/PR-FIRMS, http://www.prfirms.org)