September 18, 2023
Mergers and acquisitions, or M&A as the process is more commonly known in the business world, reached an all-time high in 2021 as companies struggled to find their footing following shutdowns and a “new normal” brought about by the pandemic. While M&As made headlines at that time with mega-deals in the $20- to $30-billion range, in 2023, M&A is taking a new form – but no less impactful for companies and their employees.
Today, mid-market transactions are dominating as CEOs use a program of both strategic acquisitions and select divestitures to transform their portfolios for the future, reports PwC.
Whether strategic moves that a company makes are to expand its operations, improve competitiveness, or achieve distinct financial objectives, M&A transactions often present a double-edged sword that brings about exciting opportunities while also introducing uncertainty and change that can be unsettling for employees. That is why effective communication during mergers and acquisitions is crucial to ensuring a smooth transition and maintaining employee morale and productivity.
Having guided companies spanning from healthcare to the financial services industries through the M&A gauntlet, The Grossman Group has honed firsthand knowledge around the intricacies of communicating mergers and acquisitions to employees. We have cultivated insights on the importance of M&A communications and the role of internal communications during this pivotal time for businesses.
The result is the identification of a step-by-step approach to effectively inform and engage employees throughout the process. Of course, even the most tried-and-true plan can still hit roadblocks along the way, which is why as part of the planning process, we make a point to identify strategies for overcoming employee resistance and tactics for unifying company cultures well beyond the initial announcement of these transformative events.
What is M&A Communications?
Often referred to as merger and acquisition communication, this is the strategic process of conveying information related to a merger or acquisition to various stakeholders, with a primary focus on employees within the organizations involved. These communications encompass a range of messages, from initial announcements to updates on the integration progress, and are designed to keep employees informed, engaged, and aligned with the company's new direction.
Why Does Communicating About Mergers and Acquisitions Matter?
Of course, keeping employees engaged is important, but should it really rise to the top of the priority list when there are legal, regulatory, and financial considerations to consider as part of every M&A deal? In short, absolutely.
Effective communication during mergers and acquisitions is essential, not only to ensure the success of the companies involved but also to ensure employees have what they need to continue performing at their best despite the changes that are underway.
Ultimately, M&A communications are the key to:
Reducing Uncertainty
M&A transactions can trigger fear and uncertainty among employees who may be concerned about job security, changes in leadership, or adjustments to their roles. According to a 2020 survey by Mercer, 73% of employees consider communications during M&A to be important for reducing anxiety and uncertainty. Clear and transparent communications help answer the most common questions and alleviate concerns that employees across the board are likely to experience. Open communications during this transformation period also fosters a sense of trust in leadership that allows employees to better focus on the here and now rather than spending time on distractions around “what if” scenarios.
Retaining Talent
Employees are a company's greatest asset, and the loss of key talent during a merger or acquisition can hinder the transaction’s success. Effective communications can help retain employees by providing a compelling case for change and addressing their concerns. In fact, a 2019 study by Deloitte found that organizations that effectively communicate during M&A are 3.5 times more likely to retain employees.
This means that those companies who take the time to plan and prioritize communications on the front end are not only preserving human capital, but also ensuring the smooth transition, cultural integration, cost-effectiveness, and long-term success of the newly merged entity.
Enhancing Employee Morale
Those companies that effectively communicate M&A changes to employees experience an increase in employee engagement compared to those that do not, according to results of annual Gallup studies focused on employee engagement. This means that communicating proactively can boost employee morale and help maintain productivity during times of transition. It all boils down to basic human nature – answering the WIIFM (what’s in it for me?).
When employees understand the rationale behind the merger or acquisition and how it benefits them, they are more likely to remain engaged and motivated. This outcome directly supports one of the most important guiding principles of M&A, which is to not let the deal distract from daily business operations.
The Role of Internal Communications in M&A
It’s clear that internal communications do matter when it comes to M&A, but that’s just the tip of the iceberg. We’ve found that defining the role of internal communications throughout each stage of the transaction and doing so early on with each stakeholder involved in the deal – that includes leadership, HR, transformation offices, IT, and legal across both companies – can make or break the success of the transaction.
Plain and simple, the internal communications team is responsible for crafting and delivering messages that keep employees informed, engaged, and aligned with the organization's goals before, during, and after a merger or acquisition. This includes:
Information Dissemination
Internal communicators are responsible for crafting and disseminating timely and accurate information about the merger or acquisition. They ensure that employees receive critical updates, including who is impacted and how, when changes will be effective, and who to contact with questions. Oftentimes the level of detail and tone of the messaging or type of information will vary by audience.
For example, there may be one set of messages for all employees of the company being acquired, another complementary set for those employees at the company doing the acquiring, and perhaps even another set of messages for those employees in departments that will directly engage with the new team members or expand as a result of the transaction. At the heart of every message is the goal of helping employees understand the implications of the transaction and what they need to do as a result.
Employee Engagement
Internal communications experts work to engage employees throughout the process. This includes creating opportunities utilizing current channels or perhaps creating new ones for employees to ask questions, share feedback, and participate in the decision-making process when appropriate.
This area of responsibility also includes establishing a feedback loop, such as formalized listening through surveys, polling, and focus groups, that allows employees to express their concerns, ask questions, and provide input that is vital for addressing employee resistance and ensuring a smooth transition.
Alignment with Corporate Culture
Internal communicators help bridge the gap between the existing corporate culture and the desired culture post-merger or acquisition. They convey the values, vision, and mission of the new entity – oftentimes facilitating the process to arrive at these fundamental pillars – all with the underlying goal of fostering a sense of unity and rallying employees around common goals and ways of working.
Three Phases of M&A Communications
A well-rounded merger or acquisition communication plan addresses three distinct phases to ensure comprehensive coverage:
Phase I: Pre-Announcement Planning
Pre-announcement planning sets the stage for how teams will work together and the philosophy around announcing and communicating details of the M&A. The importance of this phase cannot be underscored enough and takes an integrated team to complete the steps effectively.
- Stakeholder Analysis: Identify key stakeholders, including employees, and understand their concerns and expectations.
- Message Development: Craft clear and consistent messages that align with the organization's strategic objectives.
- Timing: Create a detailed timeline that outlines when each communication phase will occur. Include milestones such as the announcement date, integration progress updates, and celebrations of successes. This starts with determining the optimal timing for the announcement, taking into account market conditions and employee schedules.
From there, you can build a work-back timeline to ensure all bases are covered when the announcement day arrives. This also ensures that you don’t miss a beat following the announcement as you begin planning the next communication based on any upcoming milestones, such as closing the deal.
- Leadership Preparation: Having members of the leadership team from both companies play a visible role in the announcement helps to demonstrate both continuity and commitment. That’s why it is important to ensure those leaders are comfortable and familiar with the messaging, have practiced how to tell employees about a merger or acquisition, are clear on how they will handle tough questions, and are available to participate in events.
Phase II: Announcement
This phase is what many view as the crux of activity, and indeed the days leading up to and the day of the announcement promise to keep the entire communications team hopping. The focus during this time is to ensure seamless execution, troubleshoot any issues that may arise, and ensure all i's are dotted and t’s are crossed.
- Information Sharing: Conduct town hall meetings or webinars to present the merger or acquisition details and allow for employee questions. To ensure you reach as many members of the team as possible, you also should plan to send out written communications, such as emails and newsletters, to provide additional information and context.
- Feedback Mechanisms: Establish channels that encourage two-way dialogue for employees to ask questions and provide feedback, such as Q&A sessions or feedback forms. Appoint employee representatives to participate in integration planning and decision-making.
Phase III: Updates at Key Milestones
While some may consider the work done when the announcement is complete, the difference between good and great M&A communications is often made in the follow-up. This phase, when done correctly, should dovetail seamlessly into the company’s ongoing communications.
- Regular Updates: Provide regular updates on the progress of the merger or acquisition, including achievements and challenges. This is where communications may need to be further customized based on the impacts to individual audience groups.
- Celebrate Successes: Highlight achievements and milestones to maintain excitement and momentum. This also creates built-in opportunities to share proof points that back up the case for change that you shared when the deal was first announced.
How to Plan Employee Communications During a Merger or Acquisition
Now that we know the what, why, where, and when it is critical to spend time focused on defining the how of M&A communications. Effectively communicating a merger or acquisition to employees requires a well-thought-out plan. Here are the key steps to follow:
1. Assemble a Cross-Functional Team
Start by ensuring communications is a part of a dedicated M&A team that also includes representatives from HR, legal, senior management, and IT. This team will be critical in crafting and executing the merger or acquisition communications plan.
2. Identify the key audiences
From an internal perspective, all employees are a critical audience, but there are certainly sub-groups within that pool that warrant customized communication approaches. It is important to partner with members of the cross-function team to develop personas for these sub-groups as a means of identifying impacts, perceptions, preferred channels, and areas of concern that are unique to each group.
3. Develop a Clear Message
Craft a clear and concise message – this may be in the form of key statement messages and/or a full change narrative. Whatever form(s) it takes, this is the foundation for your communications throughout this process, so ensure you have buy-in from leadership on all sides and test the messaging from the perspective of the audience personas you created in the previous step.
Messages should explain the rationale behind the deal by laying out the case for change, the expected benefits, and what employees can anticipate and/or the actions they need to take. It's crucial to be honest and transparent, acknowledging potential challenges while emphasizing the opportunities. Including details around timing, to the extent possible, also helps employees better understand what’s coming and when.
4. Select the Proper Channels
Choose the most effective communication channels for each audience set. This might include a combination of email, intranet updates, video messages from leadership, and in-person meetings.
5. Choose the Right Timing
Timing is critical in M&A communication. Avoid rumors and leaks by carefully planning when and how you'll announce the merger or acquisition. Ensure that key stakeholders, including managers and department heads, are briefed in advance. Build out a “Day 1” timeline to ensure a thoughtful cascade of communications that will most efficiently and effectively reach all stakeholders, with employees receiving notification as early as legal and regulatory requirements allow.
6. Develop Resources
Make sure employees have access to resources to help them navigate the changes. This could include FAQs, dedicated email addresses for inquiries, and clear channels for reporting issues. Ensure frontline leaders are prepared by providing a toolkit that includes key messages, core slides to support their team meetings, FAQs, and tips for handling questions when you don’t have the answer.
More than written tools, conducting event run-throughs and potentially even leader communications training to ensure they are positioned to put their best foot forward and are consistent in how they speak about the M&A process will help prevent the need for issues management later.
7. Launch Employee Communications
Hold town hall meetings, webinars, or virtual town halls to tell employees about a merger or acquisition. Provide ample opportunities for questions and answers to address immediate concerns. Realizing that not everyone can attend a meeting at a single given time, think about recording and posting the video in a place where employees can access it later. For some companies, there may be value in holding two separate meetings to ensure shift workers or workers in different time zones all have an opportunity to engage.
8. Establish Ongoing Communication
M&A communication should be an ongoing process. Regular updates and check-ins, particularly with their direct managers, keep employees informed about the progress of the integration and any changes affecting them.
9. Monitor and Adjust
Gather feedback from employees and monitor the effectiveness of your communication efforts. Be prepared to adjust your approach if certain messages are not resonating or if issues persist.
How to Overcome Employee Resistance to a Merger or Acquisition
Even with the best-laid plans, employee resistance is a common challenge during M&A, and it can hinder the integration process. Addressing this resistance requires a well-thought-out approach grounded in principles of change management – an approach supported by McKinsey that found through ten years of data from annual surveys of M&A executives that only 38% of M&A deals achieve their objectives when change management is not adequately addressed.
From a communications perspective, that means developing a change communications plan guided by a commitment to transparency, employee involvement to reduce uncertainty and foster a sense of ownership, and leadership alignment. The latter of which is a critical, yet an all-to-often overlooked step that communicators have the power to facilitate at the earliest stage of the transaction.
This not only ensures communications and leadership are in lock step, but a KPMG study found that 91% of M&A deals with strong leadership alignment achieved or exceeded their financial targets. Ensuring that leadership teams from both organizations are aligned and communicate a shared vision for the future can serve as a powerful example to employees.
One additional consideration when looking at how communications can help address resistance is to partner with HR to develop a plan and associated communications around recognition and rewards with an eye to retaining top talent and motivating the transformation team when milestones on the M&A timeline are achieved. Mercer’s study offers affirmation of the impact of this approach, reporting that 67% of companies that recognized and rewarded employees during an M&A, which may include bonuses, promotions, or other incentives, reported successful integration.
How to Unify Company Cultures Through Mergers and Acquisitions
At the end of the day, successful M&A communications aren’t about a single moment in time, but rather the successful integration of the cultures of the two organizations. Cultural misalignment can be a significant source of friction during M&As that can lead to disruptions and even derail the entire deal. From a communications standpoint, there are steps you can take to address this challenge, including:
- Completing a Cultural Assessment. Begin by conducting a thorough cultural assessment of both organizations. Identify similarities and differences in values, norms, and behaviors. This assessment will guide your integration strategy.
- Developing a Cultural Integration Plan. Partner with HR and leadership to develop a detailed cultural integration plan that outlines how cultural differences will be addressed. Define a shared set of values and behaviors that align with the merged company's vision.
- Role Modeling by Leaders. By aligning leaders early on through discussions facilitated by the communications team and a consistent set of messages, they will be better equipped to embody the desired cultural changes and actively communicate and demonstrate these changes to employees. Their actions set the tone for the entire organization.
- Enabling Employee Involvement. Starting with the announcement and continuing as the priorities, values, and vision of the newly formed company are defined, encouraging employees to share their insights and suggestions improves outcomes, heightens morale, and makes for a stronger culture.
M&A Culture & Communications Case Study
Our team has facilitated a multi-month culture-integration process that incorporated a number of these tenants when two professional services firms closed on their merger of equals to become a Top 10 firm in its space. This marked the beginning of the most important work for the NewCo. Two legacy organizations needed to come together as one team with a shared purpose and culture that differentiates and reinforces why together is better.
Just weeks after the transaction closed, we led the firm on an important journey to define the culture of the NewCo and literally write the book on how to deliver an unmatched client experience – a pillar of the firm’s brand promise.
In less than four months, we engaged and facilitated task force teams to co-create and define a net-new NewCo purpose, mission, vision, and values. This marked the first time teams from the legacy firms worked together.
The initiative included writing and designing a 100-page book to unify the firm around its culture and guide everyone on how to deliver on the client experience, and developing key artifacts to unveil and roll out the NewCo culture at company-wide launch events and through ongoing communications. Additionally, together with company leadership, 100+ NewCo team members were identified and enlisted as champions to roll out the firm’s DNA at the annual partner meeting with more than 1,200 attendees.
The results spoke for themselves as the company:
- Gained buy-in from +1,500 NewCo team members who were part of the co-creation and engagement process.
- Transitioned from having team members associating by their legacy firm to collaborating together and identifying as One NewCo.
- Developed materials that are now used to teach and train team members across the firm, and for internal communications and marketing efforts.
The cumulative efforts gained positive feedback from clients and employees alike, who not only appreciate but also now embody the NewCo Way in all that they do.
Complexity Shouldn’t Mean Complacency
In the dynamic and competitive landscape of today's business world, M&A transactions are likely to continue as companies seek growth and strategic advantages. By understanding the importance of addressing employee concerns and cultural disparities, organizations can increase the odds of M&A success.
Embracing these strategies and adapting them to the unique needs of each M&A scenario will undoubtedly help you to achieve your desired business outcomes and further demonstrate the power of communications from the frontlines to the boardroom.
Have you identified and briefed on their charge the members who would form the cross-functional team that will lead your company through any future mergers or acquisitions?
—David Grossman
This quick guide covers a methodology you can use to transform leaders and employees from skeptical bystanders to inspired catalysts of change. Download Maximizing Strategy Development & Rollout with Top Leaders today!
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