Newgate Views: Unlocking M&A Success


Richard_BartonEffective Communications is a critical component in ensuring post-merger integration is a success, explains Newgate’s Richard Barton

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After the global financial crisis many in the West were writing with anticipation about the expected wave of investment from companies across Asia.  The argument quite rightly went that these companies were ideally placed to take advantage of weak western markets to grow and diversify their asset and investment base, in the face of stagnant domestic markets and the need to acquire skills and technology that would otherwise take years to emulate.

At that time though, many Asian corporations complained that they were not understood by Western stakeholders, who in turn complained that Asian companies did not take the time to understand how it works “over there”.

The reality was that while the markets favoured and sometimes craved investment from overseas companies, other issues, including transparency and perception, posed significant challenges to their success. Recent history shows that these communication issues were as influential on the outcome of deals in the past few years as any of the legal or financial aspects.

newgate_315x280Although Asian corporations have now successfully completed a multitude of major overseas deals, and have learned a lot about managing their reputations, reports show that the issue has not fully gone away. Many situations have revealed a second and potentially more damaging communications-related weakness, namely the difficulties experienced in successfully implementing post-merger integration strategies. And this is precisely where the true value of an acquisition should be generated.

Like the deal itself, post merger integration has its hard and soft issues. New sales strategies, production synergies, channel development and the reduction of duplicate costs are all fine on paper, but mastery of the communications, cultural and social issues that impact the efficacy of these exercises is critical. Misalignment doesn’t just prevent the benefits from being unlocked; it will negatively impact the entire business.

Employees want certainty, especially in their prospects, reporting lines, roles, salaries and benefits. To unlock fully the potential benefits of an acquisition companies need to retain and attract proven management. But in the absence of a well thought out and coordinated approach, talent will remain skeptical.

Engage employees always

Real employee engagement is a vital component to achieving success. Companies should use research as a tool to find out what employees really think. Only then can they effectively promote the objectives of the new company, explain the responsibilities and roles of those who have to deliver the merger benefits, and demonstrate why supporting the deal is in everyone’s interest.

The need for this level of awareness of the issues is as critical with external stakeholders as it is internally. Wherever the deal, foreign investment attracts scrutiny. Whether engaging with management, unions, politicians, media or regulators, acquirers should be prepared to argue the soft as well as the hard values of their deal. Acquirers will be judged not only on their products or services, but also as corporate citizens and employers. Poor preparation risks failure.

Timing is not always on the side of an acquirer, but ideally a positioning campaign with stakeholders would take place prior to any investment. Here companies should research how they are perceived and identify stakeholder concerns.

Having understood the issues, they should agree the positioning messages required to close the gaps between current external perceptions and the desired positioning. As the process unfolds the company will benefit from further research to measure the success of its campaign, enabling changes to be made as necessary.

Prior to a deal, senior spokespeople should be trained, in order to effectively sell the financial, management, strategic and growth aspects of the deal, as well as how value is to be created and shared.

With ever-increasing regulatory approvals required around the world, investments can often take several months to complete. Any communications campaign must therefore be well paced if it is not to run out of steam and news flow that reinforces the desired outcome must be carefully managed.

Companies must also accept that media styles and practices are not consistent globally. The media team should comprise internal staff who fully understand their business, alongside external advisors who fully understand the rules and nuanced customs in their local market, as well as the media and other stakeholders with whom they will engage.

Doubt or ignorance about an acquirer often leads by default to negative perceptions. Engaging stakeholders with a structured programme removes the inevitable question marks and helps foreign buyers build a much stronger base on which to build a positive reputation locally and globally. After all, they may well want to do further deals.

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Richard Barton is Managing Partner Greater China, at Newgate Communications.

He can be contacted via Richard.barton@newgate.asia  or +852 3758 2686