The key to success in mergers & acquisitions
Mergers and acquisitions (M&As) are not for the faint of heart. It’s why many businesses avoid them like the plague. For those brave firms that venture into the M&A space and succeed, however, it’s an incredible growth opportunity for market expansion, diversification, and enhanced revenue… to name just a few benefits.
The fact of the matter is that M&As are hard. For even the most organized and seasoned organizations. It takes a concerted effort to pull off the stages of a merger & acquisition. Across the various milestones – including planning, research, due diligence, closing, and implementation activities – there’s one constant factor that cannot be overlooked: the importance of communication.
According to Baker McKenzie, the key to success in any M&A is maintaining open and clear channels of communication throughout the implementation. Afterall, an M&A experience is a transformative moment for both the employer and all affected employees. This transition, if you will, comes with a host of questions and stressors for all parties involved. When not addressed early and often, these uncertainties can be detrimental to the success of a merger.
And it’s why we suggest treating an M&A like an onboarding experience.
That’s right – onboarding. Because at the end of the day, both your newly acquired team members and your acquiring employee base are going through a pivotal career change. One that requires information, preparation, and support. If you want the integration to run smoothly, communicating with your workforce in a cohesive and consistent manner is critical.
Exactly what you communicate depends on your business case and requirements (we’ll share examples later on), but the why is clear. It’s helping every level and division of your organization to…
- Know there’s a process
- Know what’s coming up next
- Know what’s expected of them
It really is that simple. Granted, it gets tricky – not to mention complicated very quickly – in execution. Which is why most M&A analysts and consultants suggest the use of technology to manage communications both at scale and via configurations to unique groups. For instance, your acquired employees should get a different message and information compared to those merging from your parent company. Ideally, those communication paths merge down the road to address your work population as a cohesive unit, but it takes time. A highly-configurable, digital solution can help you deploy strategic communications at scale. So that once you’ve made it through the early planning stages, execution is a breeze.
Now, back to what you should communicate. Obviously, we can’t tell you exactly which words to leverage. That should come from your brand voice, given the unique culture of your organization. In fact, research published in the International Journal of Innovation and Applied Studies confirms that misalignment between two company cultures is a prominent factor in acquisition failure. So it’s important to get this right as you blend your cultures together.
While the specific language, framing and cultural cues cannot be ignored, there are often standard inclusions in the types of information shared during an M&A. These include:
- What’s the timeline of the merger?
- What will my new benefits be?
- What tools will I be leveraging now?
- Will I need to roll over my 401K?
- Will my pay frequency change?
- How should I communicate to my team?
- What’s my new leadership structure?
- Who’s my HR contact?
- What should I tell my clients?
All very fair questions that require attention throughout the integration of two companies. Of course, face-to-face reassurance and communication from leaders are important, but delivering clear updates through a consistent medium that can be revisited at any moment is a no-brainer. And your new blended team of diverse workers deserve it. Being transparent and upfront both early and often makes the world of a difference during these intimidating transitions. Or – as we now know it – onboarding experiences into the new “normal”.
Mergers and acquisitions are painful and often leave employees feeling uncertain about their roles and how the M&A will impact them. MergerIntegration.com claims that 75% of merger difficulties that develop have their roots in communication problems.
Effective communication requires repetition and consistent messaging. It is essential to provide employees with comprehensive information in a well-planned and systematic manner. Thankfully, HR technologies offer active solutions to address this issue and guide employees throughout the entire process.
Trust the Data
Still unsure about the volatility of the M&A period for your employee base? The proof is in the pudding. Each of the stats below helps articulate the importance of strategic communication and integration during an M&A:
- After an acquisition, KP&G experiences a doubling of attrition rates even without layoffs. (KP&G)
- According to Harvard Business Review, 30% of employees are considered redundant during company mergers. (HBR)
- The rule of 7 is based on the marketing principle that individuals need to hear a message at least 7 times before they understand. This concept has been around since the 1930s when movie studios first coined the approach. (Factorial)
- The number of highly engaged employees decreases by 3% during mergers and acquisitions. (Quantum Workplace)
- During M&As, the focus tends to be on getting the top leadership team in place. But a recent EY report suggests that 47% of key employees leave a company within a year of the transaction and that 75% leave within the first three years. (Gallup)
- There seems to be some inertia in the c-suite, as 95% of executives describe cultural fit as critical to the success of integrating merged or acquired organizations—yet a full 25% of these leaders cite a lack of cultural cohesion and alignment as the primary reason for failure. (McKinsey)
- With 2274 deals at a combined value of $2.02 trillion, dealmaking in H1 2022 may have declined year on year – down 27 percent by value and 18 percent by volume – but activity was up 35 and 13 percent respectively compared to the average of the last M&A cycle. (Financier Worldwide)
- A 2019 study by the MIT Sloan School puts the average attrition during the first year of acquired company employees at 34 percent versus 12 percent for hired employees. (Financier Worldwide)
- (Following an M&A,) acquired workers are about twice as likely to depart than those with similar profiles hired directly. Researching 19 tech companies whose acquisitions were announced in 2020, we found that average annual employee attrition for the two years before the announcement ranged from 322 to 36 percent. In the following two years, it roughly doubled to between 55 and 71 percent. (KP&G)