What to Communicate Internally When an M&A Deal Fails to Close

Norman Birnbach, Birnbach CommunicationsIt seems to go unnoticed but a portion of announced merger or acquisition deals do not go through. Reasons range from regulatory issues, such as antitrust issues; issues around management retention issues (the length of time they are to remain in current or similar positions, non-competes for senior management, etc.) as well a pricing issues, working capital requirements, deal-related and non-deal-related lawsuits, and other due diligence issues.After a company has announced it has come to an agreement to purchase another company, typically the CEO and management team of the acquirer will convene a town hall meeting at the target company’s headquarters to address employees to explain the rationale for the deal – why the two companies will be stronger together than on their own – and what changes new employees can expect.If the deal falls through, the target CEO and management team need to again meet with employees and discuss why the deal fell through (with input from legal counsel). Management shouldn’t delay getting in front of employees because they’ll already have a sense of whether or not the acquisition or merger is working out. Again, with input from legal counsel and the company’s communications staff and advisers, management needs to address the following:

• How to address any rumors that might be circulating prior to the official announcement that the deal fell through. There certainly will be rumors flying around about the reasons the deal fell through.
• How to address the company’s future. Management needs to discuss its new road map – will it continue as a standalone or will it search for a new, better partner.
  • If the future is to remain a standalone, management needs to explain why that makes sense in light of the fact that it had recently been ready to be acquired or to merge with another company.
  • If the future is to find another partner, management needs to discuss what lessons it learned, what it will now look for in a new partner.

Mostly, employees want to know – and management needs to reassure them – that the company’s future is assured, that employees should be focused on the future, proud of what they will continue to build.Though this is not an internal communications issue, management needs to also reassure customers, partners, vendors, investors and other stakeholders – as well as current and prospective employees – that the company is stable and has a future. This may be a challenge if the target company had stated during the initial acquisition announcement that a primary reason for the deal was to access the necessary capital to expand. So management will need to find a way to credibly walk back that reason.Mostly, the once-target company needs to be prepared that others may start circling the company, looking to offer a lower price because the target is considered damaged (since the deal did not go through – even if the problems was with the acquiring company). It is crucial to be able to discuss a stable, strong future.Some things to keep in mind

• Don’t wait too long to announce that the deal will not move forward. While no company, especially publicly held companies, want to address rumors, management needs to get ahead of the news rather than for it to come from outside. If you wait too long, you’ve lost control of the narrative.
• Be clear on what you’re communicating. Your answer needs to be consistent and accurate. It undermines employees’ faith in management if conflicting messages are offered up by management.
• The almost-acquiring company and the nearly acquired company will continue to have different goals at this point, especially since people may want to point blame to one party or another (which can include management teams, attorneys, bankers, etc.) While communications teams of both companies worked together to prepare for the initial announcement to coordinate priorities, next steps and goals – that almost won’t be the case here. So one company may want to go back to reporters who originally covered the announcement while the other company may want to let the news fade. Ultimately, you need to be professional and act in the best interests of your company.
• There could be lawsuits as a result of the failed deal, certainly from shareholders and possibly from one company suing the other. If there is a lawsuit, the company needs to reassure employees so they don’t get distracted by the lawsuit (and any coverage of that suit) so they can stay focused on the company.
• Internal communications needs to help reassure employees – rather than give them reasons to bolt to another company, which could include  the former acquirer. As you develop your communications plan, keep asking: Does this address employees’ concerns and fears? Does it speak to them in a way that seems authentic (as opposed to legalese, which does not reassure parties of either the first or second part).
• Don’t ignore employees (or customers, partners, vendors, investors and other stakeholders) and hope everything will be okay. Now, more than ever, they need to feel that management has things under control and can deliver on a steady, stable future.

Communications plays an important role in merger communications, when things go as planned. But communications, especially for the target company, can play an even more important role if a deal collapses – because the future of the target is at stake as never before. Thinking through (and balancing out) what employees want to know and what attorneys, bankers and management feel like they can share, is important to get right. [author] About the Author: Norman Birnbach, an award-winning public relations executive, is the president of Birnbach Communications, a Boston-based PR and social media agency. He writes on a broad range of topics and tweets at @NormanBirnbach. He can be reached at birnbach@birnbachcom.com [/author]