Effective communication in mergers and acquisitions

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By Goke Ilesanmi


    The concept of mergers and acquisitions has long been considered one of the fastest routes to business growth. Yet, experience has shown that most mergers fail to achieve the expected synergy and are more often counterproductive at the end of the day. Post-merger integration challenges are many.

      Even though nobody expects structural changes occasioned by mergers to be so smooth, there are appropriate strategies that can be put in place to ensure that the integration process is carefully managed to limit disruptions and achieve synergy so as to exceed the expectations of all stakeholders. One of the strategies for achieving successful mergers or acquisitions is effective communication.

Role of communication

     Just as we said last week in the discourse, “Project management and effective communication”, communication needs to begin during the preliminary stage of the merger or acquisition to set the tone for success. Too often, communication does not start until it is too late. Research shows that mergers and acquisitions go through three broad phases. As part of an AT Kearney global survey conducted in 1998 to 1999, the question, “Which phase bears the greatest risk of failure?”, brought the following response: Strategy development, target shortlisting, due diligence – 30%; Negotiation and closing the deal – 17% and Post-merger integration – 53%.

Most prominent time and people issues

     This response shows that the most important time for a merger or take-over is when the deal has been formalised and the more difficult stage of “bedding down” the process has started, thus requiring intensive communication. However, there is a case that communication should start early to pave the way for internal acceptance and post-merger integration. Overwhelming experience indicates directly or indirectly that people issues are the main reason for take-over failures. And communication is still central to the people issues.

      According to McKinsey’s studies, “Management of the human side of the merger is the real key to maximising the value of the deal.” Watson Wyatt Worldwide says cultural incompatibility is consistently the biggest barrier to integration. But Mercer Human Resource Consultants’ discovery is that out of three key merger factors – people, processes and systems – only people issues made a difference to the success of mergers in the decade to 2001.

Effective employee communication

   Effective employee or internal communication is the first or second most important issue emerging in all studies of mergers. Internal communication and culture changes are identified as the hardest to achieve, but the most important in merger success. Tragically, they are generally under-resourced in post-merger integration, and are often absent before the deal and the due diligence phases. Interestingly, customer issues are also extremely poorly resourced.

     At this analytical juncture, the questions to ask are, “How could management handle the situation?” and “How could highly-paid management consultants let this happen?” The two most important constituencies to look after – customers and employees – have largely been ignored. And the reason for this defies logic. Most of the merger communication budgets around the world have been spent on external communication rather than employee or internal communication.

Critical stakeholder group

     Regardless of the brilliance of the vision and the fit in a merger, the subsequent success of the deal depends mostly on the employees. They are the ones whose day-to-day actions can make a merger work or collapse after the deal has been sealed. Sufficient investment in internal communication is the link in keeping the employee attitudes positive towards the changes brought about by the merger.

Early communication

      Even before a formal merger or acquisition is underway, employees often become aware from indirect information or by chance that something is underway. It is human nature to be inquisitive. If they feel management is keeping information from them, quite understandably they start to feel anxious.

     When people are uncertain, they start speculating about the clues in front of them. Invariably this interpretation of clues becomes paranoia as they chat with colleagues and quickly have the impression that the management is conspiring to catch them unawares. The grapevine goes overtime with rumours. Productivity will begin to drop as staff waste time in discussing rumours and losing the steam of their motivation. With well-developed rumours, some staff will actually start leaving the company before the “bad news” is broken to them.

Initial indifference

   Research shows that when a merger is announced, the staff in the acquiring company may not feel concerned initially. They belong to the new parent and do not anticipate much change. This sense of security is not always justified because the process of establishing the new joint organisation can reveal areas of the acquiring company that could be improved upon.

  However, if two roughly-equal parties merge, change will hit both sides. Employees will become anxious about their jobs. They will suddenly have to confront loss of status and influence; uncertainty about the employers’ plans; a fight for individual survival as fear of job cuts catches them; increased workloads because some people leave voluntarily or involuntarily; a  spillover effect into individuals’ lives.


 It is a truism that effective or strategic communication plays a key role in addressing these issues, but it is difficult and complex. This is because communication demands intensive time from senior management at a time when they may be totally devoted to the technical and financial aspects of the deal, and may not have sufficiently considered the impact on others. Often the skill of effective communication requires training because many managers have never received guidance on good interpersonal communication practices.


      Communication does not come easily to many managers who throughout most their careers have dealt almost entirely with hard facts and figures, not the soft people issues. These managers may not be good enough as leaders. Many managers are uncomfortable about giving tough messages to their staff, and being honest with them about bad news of job cuts or site closures.

   Mergers involve many technical and complex issues required by law, the stock exchange and other regulatory bodies. Communication is not legally required and so it is an easy area to drop down the priority list. Communication is not easily quantified and measured, which makes it difficult to grapple with when merger budgets are being considered.

     The communication function is not always represented at a sufficiently high level within the organisation, and even then the head of the function may not be strategically-minded. Lack of information flow from the upper level of management will cause problems for the first-line managers and supervisors who need to deal with the frontline employees every day. They will not have enough information to satisfy the day-to-day needs of their staff. This creates the dreaded communication vacuum – filled by the grapevine – that will undermine the positive aspects of the merger.


After the merger

After a merger has taken effect, strategic communication is central to the integration of the two organisations into a more effective single entity. By definition, this requires change communication. Effective communication during the post-merger phase is required to ensure a common understanding of the business case for the merger and the vision for the future.

  It is also required to help people understand and internalise change; keep the organisation focused on customers and productivity; reinforce desired behaviour; promote cultural alignment; help with retention and motivation of key talent; and control the rumour mill.

Good practices

   One of the good communication practices in the post-merger period is to recognise that all merger goals depend on communication. Employees have to be persuaded to believe in the corporate vision and to act to bring it about. This is a communication task. Another practice is to know the communication goals. At all times, with all stakeholders, the goal for communication needs to be kept in the forefront of the mind. Senior managers need to know their constituencies closely and segment them carefully.

     Managers need to be aware of the logistic and cultural factors necessary to communicate with staff in diverse locations. Another thing is to be flexible. Bring the best combination of communication techniques to bear on the situation and be prepared to adjust according to feedback. You also have to listen. Dialogue is the richest form of feedback, but not the only one. Another good communication practice in the post-merger period is to always communicate. Paradoxically, non-communication is still communication because it sends negative messages.


    Kim Harrison, a recognised public relations authority says you must also follow a framework to help manage the complexity. Understand all stakeholders, know the goals, write a plan, craft messages positively and effectively, select media carefully. According to Harrison, “Compare the difference between ‘We don’t expect any staff reductions’ and ‘There will be no staff reductions’ and even better, a more positive ‘We all have important roles to play in the future’.” Check senior managers’ commitment to the message and their ability to communicate it consistently, firmly and honestly.


Stages of merger communication

    Research shows that out of more than 8,795 mergers and acquisitions deals announced worldwide in 2008, the vast majority were friendly. From a communication perspective, friendly deals have three phases: pre-deal planning; deal announcement and post-integration. In contrast, hostile deals, which require persistent crisis management (communication), have more phases, and can include lobbying shareholders for proxy votes and litigation.)

Pre-deal planning

  Planning mergers and acquisitions communication may be a communication team’s most confidential assignment—much more so than quarterly earnings—and their most important one, too, since a mergers and acquisitions deal is a great opportunity to reposition the company. Ideally, senior management will invite you to the table as part of a cross-functional team that could include general counsel, investor relations (for public companies) and human resource as soon as the deal looks real.

One of the initial challenges faced by the communication team is to create and finalise the merger plan and documentation within a short time frame, and without a lot of information, since details change during each negotiation session.


    As with any announcement, you need to define the deal. Who is doing the acquisition? Is your company acquiring or being acquired? If your company is doing the acquisition, you will have more control over the process—and more work to do. What is being acquired? Is it the entire company or a business unit? How much is the deal worth? If the deal involves two small, private companies, you may not want to disclose the actual figure, since the media’s interest heightens when a lot of money is at stake. However, reporters may be more interested in a smaller deal involving a “hot” company or sector than a larger deal involving two decent but unexciting companies.

   What is the strategy behind the deal? Is it to gain access to new markets, new technology or services, or to provide improved customer service by combining complementary offerings for one-stop shopping? In other words, why does this deal make sense, and why are you doing it now? Communicating the strategy effectively can help you sell the deal—which is especially important when shareholders of public companies are involved—but it is important, too, to sell the deal to the marketplace.

Defining the announcement

   Kim Harrison, a recognised public relations authority says if the deal involves a public company and it is material, you have to announce it as soon as the contracts have been executed. Otherwise, you may have some discretion as to when to announce. What are the goals of the announcement? The initial goals for the acquiring and target companies may be very different—especially if what is being acquired is only a division—but the communication teams from both have to get together and finalise consistent messages.

Who are the main audiences for the deal? Stakeholders may include shareholders, current customers, local community leaders and employees. Determine each audience’s needs and interests and develop appropriate communication.


 The CEO of the acquiring company needs to travel to the headquarters of the target company to welcome new employees. But if the target company has multiple offices across countries and time zones, reaching all employees at the same time will be an issue. What is changing? Is the new entity changing its name, management team, stock ticker, logo or headquarters?

  Who is writing the press release? If the acquisition involves an entire company, you need only one release. If a business unit is being acquired, the company selling the unit may want to issue its own release to explain why the sale makes sense. For public companies in particular, communication departments must keep information confidential before the announcement. Norman Birnbach, president of Birnbach Communications, a Boston-based PR agency says, “A lot of companies use code names for the deal itself and for the other company involved. Otherwise, you have a crisis, as was the case when the Wall Street Journal broke the news that U.S-based Federated Department Stores was discussing a possible acquisition of U.S-based May Company—setting off a month of rumours that had to be handled concurrently with negotiations.”

Deal announcement

It is important to understand the level of interest in a deal in advance. Reporters’ first question is always about the size of the deal.


NOTE: The duration of the public speaking seminar has been greatly reduced as requested, in addition to other adjustments. You will find the programme on the right side at the upper part of my website. Click on the text and see details. I appreciate your suggestions and requests.


GOKE ILESANMI, Editor-in-Chief/CEO of https://www.gokeilesanmi.com.ng and Managing Consultant/CEO of Gokmar Communication Consulting, is a Certified Public Speaker/Emcee, (Business) Communication Specialist, Motivational Speaker, Career Management Coach, Renowned Book Reviewer, Corporate Leadership Expert and Editorial Consultant.


Tel: +234(0)8056030424; +234(0)8187499425

Email:  gokeiles2010@gmail.com; info@gokeilesanmi.com.ng

Website: www.gokeilesanmi.com.ng




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