Biz Tips: Communication is Key: How to Ensure Your Companies Merge Effectively

Biz Tips: Communication is Key: How to Ensure Your Companies Merge Effectively

Biz Tip:

Communication is Key: How to Ensure Your Companies Merge Effectively

Corporate decision-makers must prepare staff members for change to ensure a smooth transition during mergers and acquisitions.

Mergers and acquisitions (M&As) create an air of uncertainty for internal stakeholders. Many employees may wonder what the new work environment will look like, but more importantly, they worry about whether they’ll still have a place at the company once both entities have combined.

Accordingly, effective internal communication is essential for ensuring a smooth transition into the next phase of your company’s operation. By planning structured communication throughout the transition, business leaders can eliminate the everyday distractions that arise during M&As.

Change is in the Air

As technology transforms nearly every vertical, the business climate is growing increasingly competitive. Accordingly, business leaders must find ways to stay ahead of the competition – including merging with competitors.

Relatively recent reforms, relaxed regulations and expanding cash reserves have boosted executive optimism, according to a Deloitte study. Resultantly, mergers and acquisitions are on the rise – with no end in sight.

The State of The Deal M&A Trends 2019 report reveals that 79% of responding executives expect this kind of activity to increase over the next year – up 70% from the previous year. 90% of respondents believe that M&A activity will continue to increase moving forward, in part because of cost-effective financing and relatively stable stock market performance.

Many M&A deals fail to come to fruition. Accordingly, a top concern among respondents is ensuring that merger and acquisition deals work. Nevertheless, mergers and acquisitions have grown increasingly common as enterprises operating in saturated markets look for ways to expand and capture new business.

Gearing Up for the Transition

90% of mergers and acquisitions fail. 92% of surveyed executives, however, believe that failed M&A initiatives would have benefited operations, according to a survey conducted by McKinsey & Company business consultancy.

Respondents to the survey revealed that culture clash is the top reason that M&A deals fall apart. Despite the high probability of failure, M&A activity raises concerns among stakeholders.

During merger and acquisition negotiations, most executive leaders want to know how business strategy and finances might change. Middle managers and front-line employees typically want to know how the marriage of two distinct companies will change their roles and compensation, as well as the company business structure. By leaving these questions unanswered – or only partially answered – decision-makers may unintentionally invite opposition to the merger.

To support a successful M&A initiative, organizational leadership must corral a management team of top performers to oversee the process. The management team should first set out to clearly define what corporate culture will look like after the two organizations have merged.

They must identify differences in corporate culture between the two companies to facilitate this process. The team assumes responsibility for creating a plan to align the goals of the two organizations and monitor the success of the merger. By communicating the desired new culture to stakeholders, the team will establish the fundamental criteria for the shape of the new organization.

Informing Internal Stakeholders

During the ordinary course of business, miscommunication costs enterprises an annual average of $5,200 each year. Throughout a merger, however, miscommunication can prove disastrous. Accordingly, business leaders must take steps to ensure that internal stakeholders have access to vital information.

Primarily, internal stakeholders are the employees of the two companies that plan to merge. Stakeholder roles and responsibilities vary throughout organizations, so it’s essential to develop personalized messages for each type of interested party.

Also, it’s important to establish milestones for the various stages of the M&A process. An effective plan enables the management team to communicate these milestones to stakeholders. Furthermore, the plan will enable decision-makers of both organizations to agree on what information needs to make its way to internal stakeholders.

The process of developing a communication plan helps to promote buy-in from the leadership of both organizations. It also clarifies exactly who’s accountable for the various milestones of the M&A initiative.

Don’t Let Lack of Communication Kill the Deal

It’s crucial to secure decision-maker and stakeholder buy-in from both organizations before the start of any merger and acquisition process. By planning M&A communications, management teams address the fact that the cultures of two different organizations will not dissolve just because the two companies have merged into one.

According to Rebecca Weintraub, Ph.D., clinical professor and director of the masters in communication management program at USC, research ranging from academic studies to surveys of CEOs indicates the single biggest reason mergers do not achieve their desired results is because of a lack of communication.

“Often the leadership team making the decisions leading to a merger have spent months, often years, working to make the deal. They have weighed the pros and cons, understand the market conditions making the merger attractive, and know the impact of the merger on their personal situations. When they make the announcement to employees, it is, literally, a done deal.

The employees have not had months to evaluate and understand it nor do they have any indication of what the merger will mean to them personally. So, it should be no surprise to the leadership teams of both companies that employee reaction is overwhelmingly negative. But, it usually is.”

However, by planning communication and earning the advanced buy-in of relevant stakeholders during an M&A transition, management teams can minimize the impact on the transaction that may result because of deeply ingrained corporate cultures.

“During the transition period of actually integrating the merged companies, there are usually many teams working issues from staffing to benefits to office or plant closures, etc. I find that most companies announce that these teams are working and that when there are decisions, employees will be the first to know. Unfortunately, there then follows weeks and weeks of silence because the decision making process takes so long. Communication abhors a vacuum, so rumors and speculation — usually negative — fill the void. A much better plan would be a regular communique, even if all it says is, ‘The teams are still working on this complex integration,’” says Dr. Weintraub.

A clear communication plan can help organizations address corporate culture clashes during mergers and acquisitions, while paving the way for a new, unified value system – and a powerfully effective partnership that may help your enterprise conquer the competition.

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