13 Universal Truths for Marketing a Major Merger/ Acquisition
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13 Universal Truths for Marketing a Major Merger/Acquisition
In the year 2014, there were 12,039 merger and acquisition transactions in the United States. A recent study indicates that 75% of mergers fail to deliver on the expected results. Further, only 44% of business customers express overall satisfaction with their financial institution after a merger. Another study suggests that the management of people and people-related processes during an M&A is a critical determinant of the success or failure of a merger or acquisition deal. “Doing the deal,” is the tip of the iceberg. The successful integration of the two businesses is where the promises are kept or misspent. The company’s market position is on the line during a major corporate change event. Employees can become internally focused, customers become confused and competitors take advantage. The company’s brand reputation and market momentum can suffer badly.
Partners of The Bedford Group have managed change marketing strategy through major corporate change events including billion dollar mergers, divestitures, consolidations and strategic restructurings. There are some universal truths to be considered when a company is anticipating a major change event or finds itself in the midst of one with little warning.
The first, and overriding, notion is that the employees are the company. Particularly in the services sectors, they represent the culture, the brand, and the customer experience with the company. Employee questions, concerns, and feelings toward the integration of the two companies come out in every customer touch-point, from a sales transaction to a customer service call to a purely social gathering with friends. This internal “grapevine” evaluation of the value and viability of the transaction will be in the marketplace exceedingly quickly.
Before focusing on external communications through the press and advertising, consider how you will use/build internal communications mechanisms to be sure that employees are the first to know and have an avenue for two-way communications.
The following are some universal truths to consider when engaged in a major corporate change event.
1. Your employees are your best form of marketing during change. If your people don’t feel good about the change, your customers will know it quickly. This is particularly true in service businesses, where your staff is the major corporate asset. Employees can be:
- Ambassadors of change
- Neutral and allow customers to form their own opinions
- More effective than your competitors in convincing customers to run the other way.
2. Have a strategy, a plan, and an Implementation Team. Change events challenge the resources of the company. Normal business must be continued while preparations for communicating and implementing the corporate change are prepared.
Particularly when mergers are involved and there are duplicate resources available, form a joint team of professionals. Typically, there is an Internal Communications Team working in tandem with an External Communications Team. Both teams are made up of traditional marketing and corporate communications staff. Both teams will need to include representatives from legal, HR, finance, operations, sales, facilities and other departments depending on the nature of the changes being marketed. The team should have a high-visibility sponsor, preferably the CEO but no less than a visible EVP level. These groups should meet frequently (at least weekly).
Having both a Strategic Team and an Implementation Team formed after the initial strategies are developed is often valuable. The Implementation Team will likely be comprised of subject experts who are adept at detailed project management.
3. Segment the benefits of the change. What are the factors that are beneficial to employees, shareholders, customers and other stakeholders? Use these benefits to create a set of standard key messages about the changes to be marketed to the appropriate audience. Be truthful and genuine. It only takes one example of misdirection or dishonesty to create employee distrust of management’s messages.
For example, don’t try to sell a shareholder benefits as a customer or employee benefit. While is it hopeful that all of your employees are shareholders, they typically do not have enough stake in the company to think and act as shareholders.
4. It’s about the future, not the past. Change requires strongly embracing the future and a quick release of the past. Keep the organization’s “eyes” looking forward. Keep it thinking about what the customer wants. Those who have worked at the company for a long time tend to pull the company back into issues of tradition. The true point is where are you taking the company tomorrow to serve customers better.
- Customers do not care about the name of the company or the logo anywhere near as much as key employees, nor do they care who is going to run XYZ department after the merger. Customers care little about the past. What will you do for them today or tomorrow?
- For employees, communications is about the people that remain, not those that leave. If there are inevitable staffing cuts, focus communications around the people who will remain after staffing cuts or changes. Deal with “survivor syndrome.” Focus the organization externally. Work to eliminate the inwardness that comes with change.
5. Get on the same page with employees. Don’t assume that all people in the process are at the same point of understanding or commitment to the change. Senior leaders have put their lives into the change. For many it will be the height of their careers. As a result, senior managers are well ahead of the troops in information and understanding of the benefits of the transaction. They need to slow down and communicate in a meaningful, factual and honest way before proceeding.
Secondly, corporate executives are not necessarily in touch with the basic needs and motivations of the line employee. The average employee may not have such things as change-of-control agreements and large stock option packages that vest during mergers. They may not immediately see a direct correlation between the reported reasons for the change, e.g. increasing shareholder value, vertical integration, cost efficiencies, etc.
Change is a very personal issue. It involves a loss of control that brings the average employee back down Maslow’s Hierarchy of Needs. Employees, once content with their careers, are pushed down the hierarchy to issues like, “will I have a job when this is all done?” Meanwhile, corporate executives are most concerned with how well this change will affect their “self-actualization.”
6. Communicate frequently. Think of the image of an “information tank” that represents all of the information that can be shared during a change. This information tank will always be full of information. If the tank is filled 10% with good information from management, the remaining 90% will be filled with rumor and speculation. It is up to the organization to decide how much of the information in the tank is correct. Communicate as frequently as possible with meaningful information.
7. Decisiveness and Speed. Per the previous truth, employees are very hungry for information. Often, it is not whether the information being dispensed has a good, bad or neutral consequence that is important. It is the fact that an issue can be closed, and the employees now know what their future holds.
Do not operate under the belief that change must be doled out a little at a time because the employees or organization isn’t ready for “that much change.” Make changes quickly, decisively and as fairly as possible.
There’s an old story about the farmer who believed that shortening his dog’s tail an inch at a time was easier on the dog than simply making the decisive cut with the first blow of the ax. Most of us can understand what the dog’s opinion might be.
This truth is important no matter whether the decisions are seen as benign or bad news. Spreading bad news over a longer period is more painful than making that one decisive action. The idea of a “thousand cuts” is distasteful and a morale drain.
8. Show visible leadership. According to a merger communications study sponsored by The Conference Board, 55% of the company’s surveyed give highly customized information to the board of directors during a major change event. 48% do so for top management, but less than 30% customize merger information for middle management and lower levels of management.
Information will likely trickle down from management over time. Work to shorten the chain. Make senior leadership very visible in providing key information. While it is important that a few, very senior people consistently present very critical information, the company must also empower middle management to present and interpret news and information for their direct reports.
9. Be truthful – Always. Spin is spin, and people generally know when they are being spun. Employees are smart. They know when they’re getting the truth and when it is “corporate speak”. Shoot straight and you will be rewarded.
Many answers won’t be known immediately. At a minimum, communicate when key decisions will be made. If the deadline must be moved back, communicate again, and give the rationale for the move of date. Suspicions build with silence.
With major corporate change, sometimes the glass is half full and sometimes it’s half empty. It isn’t always either. Be willing to show that a particular change isn’t necessarily “good” for everyone. It isn’t necessarily a zero sum game, but there will be winners and losers on some issues.
10. Confidentiality. There is always the need to keep certain aspects of the change-plan confidential – organizational plans, new corporate brand names, etc. While it is important to communicate honestly and openly with employees on most subjects, confidential topics must be kept confidential.
A company that lets the grapevine run the process will look weak and ineffective. Leaks of key information show that there are rogues in the management team. Employees may choose to follow the rogues and disregard their own loyalty to the company.
Confidential information can give the feeling of empowerment in a situation where real power is concentrated among very few people. Make confidentiality serious. Make it their job to keep the secret. Create non-disclosure contracts that risk the job of the individual for sharing the information with anyone. Leaks show lack of respect for the company and the change process.
11. Two-Way Communications. Create mechanisms for two-way communications with employees. Allow very open dialogue/venting on concerns and issues. Hold “town meetings” with senior management. No subjects can be off-limits. Use the company intranet to field questions. Have a mechanism for gathering customer questions/concerns and getting those to the people who can address key issues.
- Employees are your best weapons to market the change to customers. Focus on customers, but be sure that customer service representatives are the first to be equipped with the information they personally and professionally need to clearly communicate with customers.
- Press Relations. Many of the internal truths are the same for the press. Shoot straight, but be careful. Make sure you give all of the facts. Don’t try spin. Use key themes and messages you wish to convey. If you already have poor press relations, don’t expect them to improve during a change event.
- Customer Feedback. Build a customer feedback mechanism including tracking research, open lines, web-based feedback, and “town hall meetings”. Show a true concern for customer issues, but the change is not a customer vote.
12. Name/Corporate Mark Changes. The name, logo, and corporate colors are among the least important decisions a company can make in a merger or other change that requires consideration of a name- or graphic-identity-change. Furthermore, such changes are not a personal issue that the CEO and President need to be emotionally involved with. Our research notes that:
- Customers rarely care anywhere near as much as management about a name-change, no matter how long the old name has been around.
- The right marketing and consistent promotion of a new name overcomes most bad name decisions. Make a decision, support it, and stick with it.
- There is no name that will make all happy.
- Let the professionals guide you. Don’t use brother-in-law surveys to guide your thinking.
13. Count to 10 before reacting to competitor’s marketing efforts. Your smarter competitors will attack while you are going through change. The first thing your competitors want to do is further divert the company’s focus in serving its customers. Direct attacks via the press or advertising are likely. Certainly direct selling of the change’s negatives will be made to your customers.
Don’t respond in like kind to the competitor. Respond to your employees and customers as necessary. Don’t let corporate ego be the reason for response. Communicating to your people, who will in turn reassure your customers, is your best defense.
Consider whether your response to corporate attacks is more about corporate/management ego, or whether it is about customers. If it’s the former, save some money and send the competitor’s CEO a letter. Otherwise you’re diverting the attention of the employees and corporate resources from the most important task: reassuring your customers.
- Booz-Allen & Hamilton
- Barlow Research Associates, Inc.
- “Survivor Syndrome”
- The Bedford Group CMO Study
About The Bedford Group
The Bedford Group is an Atlanta based Marketing Management Consulting firm that has been in operation since 1986. It has built its reputation on marketing organization support, agency search and relationship management and strategic marketing consulting. Unlike traditional advertising consultants, The Bedford Group looks beyond traditional marketing disciplines to solve complex, enterprise-wide issues for efficient resource management and improving marketing ROI.