The job of selling a merger to employees is one of the most challenging tests for a communicator. Un-selling it makes the first part look easy.
In the wake of some spectacular M&A failures - the abandoned Sprint/WorldCom wedding this year, prospective problems for AOL/Time Warner and the Monsanto/American Home
Products merger cancellation in late 1998, to name a few - it is important to recognize that sometimes corporate communicators have the challenge of reversing messages.
Whether the breakdown occurs because of regulatory problems, organizational culture clash or backlash in financial markets, communicators must persuade employees this reversal
of fortune is neither unforeseen nor cause for alarm.
Richard Russack recently had to deliver bad news. The VP of corporate relations for Burlington Northern Santa Fe Corp. had to tell the railroad company's 44,000 employees that
its merger with Canadian National Railway, announced in December 1999, had been called off seven months later because of regulatory problems.
"You just tell them. You tell them as quickly as you do the outside world. You treat them with the same respect as you do the investors," Russack says. BNSF put out the message
on the company intranet within 15 minutes of a decision by the U.S. Court of Appeals to kill the deal because of monopoly concerns. A week later, both companies agreed to pull
out. Within minutes two messages, from the chairman and the CEO, were sent to all employees via voice mail, Russack says.
Typically, news of the failed transaction doesn't come as a surprise, according to David Dell, research director at The Conference Board. Media and other external critics take
care of "some of the soft landing stuff for the PR department," Dell says.
But there is still the matter of reshaping employees' expectations. After the announcement of a proposed merger, things like strategic plans or five-year budgets can get pushed
to the side because employees think they won't be needed. This "erosion" is a common problem, Dell says. "There is some loss of forward momentum in planning."
The best way to try to head this off is to include cautionary messages to employees during the post-announcement, pre-consummation period. "Companies on all sides have...an
opportunity to communicate effectively that this might not happen [and] cushion the expectations," Dell says. "Second, it is fortunate this has happened enough that people are a
little more realistic." Good PR tries to stabilize the situation, he says, by encouraging employees to have a wait-and-see attitude.
Other messages should convey a sense of opportunity for a fresh start. "Boy, we dodged a bullet that time - we started to see we have a better future without them," Dell
suggests.
Leadership Roles
When an M&A doesn't work out, the leadership of the company will step forward with the message explaining why it failed. "The tone of the message has to be sober; it is not
a cause for celebration or mourning, but for reflection," Dell says.
Corporate communicators have the opportunity to guide their leaders and structure their messages, says Gary Grates, president of GCI Boxenbaum Grates, a New York organizational
consulting firm. "They know the perceptions internally, how they track with the external perceptions," Grates says. PR executives can influence corporate leaders about keeping the
messages on those two tracks in line. "The same kind of effort put into making the marriage work has to go into making people understand why it didn't."
Calling off a corporate wedding poses another leadership challenge. Top management has to consider what they said previously about the deal, "because they may have to eat some
words," Dell says. And there's the issue of executive reputation. The leadership may need a morale boost. "They're the ones who have been doing the courting,"Grates says. "They're
going to be gauged by the financial community, their board, their peers."
Covering Your Bets
Planning for failure even as you talk up the merger can make the momentum shift easier.
"It's a good thing for communicators to have this as part of scenario planning," Grates says. "If this merger was critical to your growth strategy, it's incumbent to [think
ahead] - what will we do now? How will we survive?"
When a merger or acquisition is derailed, the underlying reasons for the deal are still there. Both parties are left looking for another partner to achieve the objectives that
drove the proposal to begin with. It's important that corporate communicators express the original corporate purpose for the deal, why it was called off and the steps the company
will take to meet its goals.
The message is a little easier when a regulatory hurdle proves to be too high to overcome. Things are trickier when business circumstances prove to be the stumbling block.
"When it's more a cultural issue, or something happened when you did your due diligence, that's when you have to be on top of the [corporate] culture, expectations, vision...If
you try to spin it, you're lost. Employees today are much smarter, much more aware. You need their support."
(Russack, 817/352-6425; Dell, 212/339-0407; Grates, 212/537-8200)
Merger Announcements Not Accompanied by Communication Skills
Few senior managers are prepared for their communications roles when a merger or acquisition is announced, a Conference Board study concluded last week.
Less than one-third of the 88 senior communications, human resources and public relations executives polled in the study - drawn from companies that recently went through a
merger or acquisition - reported that training was provided to top management (excluding CEOs). Only 20% of the companies trained the CEO, middle managers or frontline
supervisors. But 91% of the participants identified CEOs and senior managers as the people most likely to be called upon during the pre-merger phase.
The lack of a message customized to different organizational levels was another identified shortcoming. The survey reported that 56% of the respondents said customized messages
are prepared for the board of directors, and 48% do so for top management. But less than 30% reported tailoring merger information for middle management and lower-level
employees.
(The Conference Board, 212/339-0231)