Amid M&A activity, communication is needed
10 DECEMBER 2015 7:08 AM
In M&A scenarios, a solid and well-executed communications strategy can lead to a smooth integration.
In a world where bigger is better, 2015 has been a record year for merger-and-acquisition activity. The Wall Street Journal reports that more than $2.3 trillion worth of M&A deals have been announced this year, up 46% from 2014. Companies across all industries are looking for opportunities to achieve economies of scale, access new customers, expand brand offerings, move into new geographic areas and create a sustainable competitive advantage.
Our industry is no stranger to consolidation. Over the past 20 years we've seen such combinations as Promus-DoubleTree, Hilton-Bally's, Starwood-ITT, Hilton-Promus, Marriott-Ritz-Carlton and Hilton-Hilton International, among others. The hospitality industry didn't sit out the 2015 merger mania with Marriott International's planned acquisition of Starwood Hotels & Resorts Worldwide or AccorHotels’ announced acquisition of FRHI Holdings, parent company of the Fairmont, Raffles and Swissôtel brands.
Having been personally and intimately involved with the Hilton-related transactions, I can say that the strategic rationale driving these deals varies. With Bally's it was about achieving a dominant position in the gaming industry; with Promus, the driver was growing our brand portfolio and fee income stream; with Hilton International, the goal was creating maximum value for a brand that had been separated for 40 years.
The need for communication
But an important constant in all of these deals—and in any M&A transaction—was the need for timely and effective communications with a wide range of constituents, including, but not limited to: shareholders; employees; customers; owners/franchisees; government officials/regulators; credit rating agencies; and organized labor representatives.
First and foremost, the rationale for the transaction must be articulated and condensed to four or five message points geared to these various audiences. Those points form the basis for all future communications, supplemented and updated with new information as it becomes available.
Question-and-answer documents should be created addressing potential concerns (of course, early in the game, the most honest answer might be: “We don't know yet as those details are being worked out, but we will keep you apprised as decisions are reached.”)
While the transaction headlines might be similar for all audiences (“more valuable,” “new opportunities,” etc.), stakeholders have different concerns:
- investors/analysts = value of the company, achievement of synergies;
- employees = my job, benefits, relocation;
- customers = loyalty points, new brands; and
- owners = new franchise opportunities, competition from newly acquired brands.
This message development process must be initiated well in advance of the planned public release date.
Timeliness of communications is critical, but there's a fine line to be navigated between being “timely” and (for a public company, at least) inadvertently disclosing material information prematurely. You certainly don't want key stakeholders learning about the deal by reading about it in the newspaper over their morning coffee, but the Securities and Exchange Commission doesn't look kindly on “heads-up” to selective audiences.
The approach we followed was to send letters—simultaneously with the public release of the news announcement—to our employees, owners and others telling them about the transaction, the rationale behind it, what potential impact it would have on them (to the extent we could discuss that with any certainty) and a promise to communicate further as details were ironed out.
It's important, especially early on in the process, to say what you know, not speculate on what might or might not happen, and not make promises or guarantees on which you might not be able to deliver. This affects employees most of all, concerned with what the deal means for their jobs, their benefits and potential opportunities for advancement. Change can be as unsettling as it is exciting.
Jeff Poulton, finance chief of biotech company Shire, told the WSJ that communicating what will happen to employees shouldn't be underestimated. “Clarity is what people want,” he told the paper.
Supplementing written communications with in-person meetings—not only with employees, but with key investors, owners and others—demonstrates management's commitment to keeping people informed as the transaction unfolds.
After bringing your important stakeholders into the process in a timely manner, consistency of communication must not be overlooked. If you've committed to frequent communications, follow through. In a major transaction, it's impossible to completely eliminate the rumor mill, but periodic updates with the latest information can help. This might take the form of emails, special “transaction” newsletters, appearances at meetings and conferences, conference calls, establishment of a transaction hotline, use of social media or any combination thereof. What's important is the “here's what we know now” theme.
Rules of thumb
A good rule of thumb we adhered to at Hilton in all our various transactions included identifying a relatively few senior management members to oversee activity while the deal was being negotiated. M&A deals are exciting and everybody wants to be part of that excitement, but it's important to recognize that while a deal is being discussed there's a company to run and that's where most people need to be focused.
Secondly, because there are several months between announcement and closing, we created a transition committee to address all aspects of integrating the two companies; you want to hit the ground running as soon as the deal closes. It's a good idea to “plan for success” and (to the extent possible and realistic, given requirements for the deal closing) begin thinking of the two organizations as one. All constituents, in spite of their varying interests, are looking for timely and tangible results, so getting started fast is of paramount importance.
In any M&A scenario, a solid, well-thought-out and well-executed communications strategy can lead to a smooth integration.
Marc Grossman is a senior communications executive who served as senior VP, corporate affairs, for Hilton Hotels Corporation, where he was responsible for all global corporate communications, investor/financial relations, public affairs, brand/marketing public relations, crisis communications and internal communications. He also held senior positions with three leading international communications firms. He can be reached at firstname.lastname@example.org.
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