There's a reason they call it a "hostile" takeover. In early June, mega software player Oracle Corp. offered $5.1 billion for rival PeopleSoft and upped the ante to $6.3
billion on June 18. The board rejected the offer, saying it "dramatically undervalues" the company and was in fact a ploy, "designed to disrupt" PeopleSoft's pending merger with
J.D. Edwards & Co.
Oracle hasn't been mincing words, either. When PeopleSoft amended its merger agreement with J.D. Edwards, Oracle issued a press release claiming the amendment would "eliminate
the required vote of PeopleSoft shareholders with respect to the merger." The press releases quoted Oracle CEO Larry Ellison as saying: "PeopleSoft is doing everything it can to
prevent its shareholders from voting." Even J.D. Edwards chimed in, with the firm's chairman calling the Oracle offer an "arrogant, unlawful and destructive course of action."
Both PeopleSoft and Oracle have dropped serious coin on ads to make their arguments. Both have hired M&A crisis gurus; Oracle has Kekst, while PeopleSoft has Joele Frank,
Wilkinson Brimmer Katcher. Kekst & Co. is a corporate and financial communications firm, as is Joele Frank of Wilkinson Brimmer Katcher. Both companies declined to comment on
their strategies; so did the PR contacts at PeopleSoft and Oracle.
Meanwhile, as Oracle and PeopleSoft slug it out, the PR world is less than impressed. "Calling names ... doesn't produce anything positive for anybody," says David Schull,
senior vice president for PR firm Thorpe & Co. But it's not just the name-calling that has raised eyebrows. Both sides have made even greater strategic mistakes, in the eyes
of PR pros who have fought these wars before.
Sour Notes
Many cite the aggressor, Oracle, which in the early days of the hostile bid indicated that it would discontinue PeopleSoft products, should a successful merger come about.
"That is pretty high-stakes stuff, and it immediately gives the representatives of PeopleSoft a lot of ground to stand on," says Jeff Linton, managing director at Dix & Eaton,
a PR/IR specialty firm. In fact, Oracle executives were backpedaling on this position within weeks, telling the press: "We want to let PeopleSoft customers know that we are not
killing their product." But the sour note had already been struck.
Yet PeopleSoft has stumbled, too, declaring early on that any proposed takeover by Oracle would almost certainly violate antitrust laws.
The problem with an antitrust threat is that it ties your own hands. Suppose you decide to move ahead on this deal: You've just made it that much harder on yourself, warning
Federal regulators that the deal may not be legit. Or suppose that, like PeopleSoft, you have another deal in the making. Isn't the Justice Department bound to wonder why a merger
with J.D. Edwards would be kosher, while a deal with Oracle would be taboo? As a communications tool, an antitrust warning can have an impact -- but it's a big risk.
At the same time, both sides appear to have lost PR ground when it comes to what some are calling the personality war. Oracle's Ellison is a forceful, dynamic individual, even
in the world of big-time CEOs. Some say his dominant personality has caused an image problem for Oracle insofar as the takeover attempt has been perceived as being an Ellison
event, rather than an Oracle event.
Others read it another way. One PR source who requested anonymity suggested that PeopleSoft has erred in building its defense in opposition to Ellison, rather than in
opposition to the deal itself. "It is not up to you as the CEO of the target firm to make the determination of shareholder interest without considering the offer," says the
source. "You cannot appear to make this a personal thing."
Success Strategies
Is there a right way for PR to message a hostile takeover? Absolutely. Both the aggressor and the target have an urgent need for PR in pressing their case. Look at it this way.
An offer might be just about numbers: How much is a firm worth, and how much is being offered? But half of that equation is unknown. Nobody knows what PeopleSoft will be worth
tomorrow. That will depend on the economy and the product line and the clientele and a dozen other variables. That's where PR comes in. In a takeover scenario, PR needs to tell a
convincing story about the future.
For the aggressor, the job of PR is to tell a story in which value increases for everyone -- for clients, for investors and for both companies -- through a merger. For the
target firm, "the communications have to show that the company is a sound one and that it is moving in sound directions for the stockholders," says Stan Sauerhaft, head of the
M&A practice for Burson-Marsteller. "You need to show that you are well positioned for future growth. That story has to be gotten out, in order to get the sympathy of the
majority on your side."
One way to do that is through direct client references. "I don't think that defensive postures are the way to go," says Jeanine Moss, a co-founder of crisis communications firm
Turning Point Solutions. "My answer to the press would be: 'Yes they are coming after us, but let me tell you about my product. My customers think it is really great too. In fact,
let me get them on the phone for you right now. Frankly we think our customers can best explain why we should keep our product the way it is, so let me give you the names of these
six people.'"
A spin on this type of strategy has been a part of PeopleSoft's approach. A full-page ad in The New York Times June 18 carried endorsements from almost a dozen executives in
various industries backing PeopleSoft products and, in many cases, specifically chiding Oracle for its takeover attempt. The ad strategy has been mutual, with both contestants
buying space in The Wall Street Journal, The Financial Times and the Times to make their case.
Indeed, the aggressor needs to strike a balance: be assertive, without being aggressive. "If they are going to sell a deal on Wall Street, they have to show why this is a good
combination, but they have to do it in a way that is not threatening to customers and that is not overly threatening to the target company," Dix & Eaton's Linton says.
People will expect certain administrative and production redundancies to be eliminated in a merger: Such consolidation of assets is a big part of the value proposition here,
after all. PR for the aggressor has to make that case, but it must be done delicately. "The way to project that in a manner that is non-threatening," Linton says, "is to suggest
that the synergies would be achieved out of the hide of both organizations."
In a Hostile Takeover, Keep Cool
- Consider the Focus: The media is calling every day for comments on the takeover bid. That's good news, unless you have a product release planned. "You might reconsider the
timing of major announcements if you see that the focus is going to be diluted by other things that are going on," cautions David Schull, senior VP at Thorpe & Co. - When Things Get Sticky: If your bid is taking a beating, try for a change of venue. Schedule the CEO to give a speech on another topic, preferably in a different city. "Get
that CEO outside of the normal beat reporter, get him outside of the normal news on the business, and do things in a more creative way in order to shift the focus," says Stan
Steinreich, COO of CarryOn Communication. - Stay Positive: The overall message of the target firm should be to emphasize its ongoing value, "but it is very, very difficult not to get defensive when you are being
attacked constantly," says Jeanine Moss of Turning Point Solutions. "So it is very, very important that the members of management keep each other in check."
Contacts: Jeff Linton, 216.241-4602, [email protected]; Jeanine Moss, 917.714.6253, [email protected]; Stan Sauerhaft, 914.273.8849, [email protected]; David
Schull, 305.446.2700, [email protected]; Stan Steinreich, 323.848-4300, [email protected]