Why neglecting internal communications can lead to external harm

The M&A boom of 2014 has already surpassed $3.4 trillion globally and shows little sign of abating. While management teams and bankers involved in these transactions focus squarely on persuading investors and the outside world of the merits of the deal, they often lose sight of another crucial stakeholder group: employees.

The M&A boom of 2014 has already surpassed $3.4 trillion globally and shows little sign of abating. While management teams and bankers involved in these transactions focus squarely on persuading investors and the outside world of the merits of the deal, they often lose sight of another crucial stakeholder group: employees.

Early and proactive internal communications can contribute significantly to the success of a deal, giving employees a reason to believe and motivation to embrace their company’s future. These communications can also help reassure employees who may feel unsettled by the speculation, averting a fall in productivity, or worse, a talent exit to rival firms.

But the opposite is true too. We’ve all witnessed companies overlook internal communications and stumble in the wake of a merger or acquisition because of a rift in their corporate culture. In fact, these problems can arise regardless of whether the deal happens or not.

That said, M&A creates very specific communications challenges, in particular because of regulatory restrictions, which limit what you can say to employees. Below, we share our key recommendations for companies to consider when addressing internal communications in an M&A deal.

1. Coping with early speculation

Speculation about a possible takeover can be extremely damaging to morale. If a leak emerges, rumours will spread rapidly amongst employees, triggering fear and uncertainty.

Although you will be subject to strict regulation about what you can say if the deal is price sensitive and requires regulatory disclosure, that does not mean you should say nothing.

Advance preparation is key. As part of your scenario planning, you should prepare clear messaging for employees in partnership with the deal advisory team, legal counsel, and the company’s head of HR.

You should keep a regular watch on media, chat rooms, blogs, rumours from traders and share price moves that indicate a leak is imminent. Once a leak gets out, the internal approach will need to mirror the external approach. You should work on the assumption that everything said internally could reach an external audience.

Typically, if the leak has very little information and is general and speculative, you will not want to say anything. But if there is a detailed leak that forces you to make a regulatory announcement, it is important that you communicate this to employees as quickly as possible – ideally to coincide with the stock exchange announcement. It is much better that your employees hear from you first in your own words.

It also is important to ensure there is clear alignment between all internal and external communications – and whilst you will communicate very differently to each audience, the underlying message should be the same.

Depending on where your employees work, you will need to consider the best channels to communicate with them quickly and effectively. Distribution rather than the content of communications messages is usually the biggest problem because leaks often happen at the worst possible time.

2. Preserving goodwill and respect

Once a deal is on the table, it can spark instant anxiety and a culture of ‘us versus them.’ Most employees will care little about the details of the deal itself, but they will rightly be concerned about how a transaction will affect their own job and prospects.

In the early stages of a transaction it simply won’t be possible to answer most of the questions that employees have. And the assurances that employees crave may be unrealistic and ones that you cannot truthfully provide.

Nevertheless, it is far better to communicate at a stage when information is incomplete than to wait to provide the full picture once the story has already been shaped by speculation and widespread media commentary.

By explaining and engaging, companies can show a commitment to treating their employees with courtesy and respect. Companies that do this will stand a much better chance of winning the long term support of their employees, whether the transaction eventually succeeds or fails. That way trust and goodwill are preserved – a prize which, more than ever in today’s increasingly transparent world, is worth striving for.

3. What’s in it for me?

Once a deal is official you will be able to communicate more fully.

It is important to explain the deal very simply and provide a clear vision of the future opportunities opened up to employees by the transaction.

It is an unfortunate fact of life that many deals do result in overlap and job cuts. It is critical that you do not mislead employees at any time, particularly on important and sensitive issues around their employment. Be truthful and explain that you will tell them as soon as you are able to.

Getting employees on board with your company’s vision could be the difference between a smooth and successful transition and long term upheaval.