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How to Handle Internal Communications During a Merger

Michael DesRochers
Michael DesRochers

M&A deals are on the rise. How should entrepreneurs and business leaders prepare their workforce when going through a merger?

In June 2018, the Walt Disney Company offered to purchase most of 21st Century Fox for $71.3 billion. That same month, AT&T acquired Time Warner for $85 billion. According to Deloitte's 2018 M&A Trends Report, this was not surprising: "Corporate and private equity executives foresaw an acceleration of merger and acquisition activity in 2018."

For entrepreneurs, business owners and C-suite executives, a rise in M&A activity means they could be part of a deal in the near future. It would be wise to consider an employee communication plan a vital element in the event that an enticing deal comes to fruition.

Sample merger and acquisition letter to employees

Your merger and acquisition letter to your staff should include the following (in this order):

1. Announce the merger.

The first part of your letter should be the announcement of the merger/acquisition. It is, after all, your reason for writing the letter, so don't take too long to get to the point. This section should immediately attempt to clear up any confusion, anxieties or rumors that have been surfacing. It will outline the timeline of the merger/acquisition and provide details about both companies, including the steps for moving forward.

2. Describe the reason for the merger.

In the next section of your letter, explain the "why" behind the merger. What will you achieve in merging with this other company? For instance, maybe you're looking to increase your customer reach, or perhaps you want to diversify your operations. Whatever the case, share it with your employees so they understand your goals for these changes.

3. Address anticipated questions and concerns.

Naturally, your employees' first question will be whether they still have their jobs and how their roles will change. Address these issues upfront – even the uncomfortable ones – by describing any immediate changes that will affect employees. Also offer reassurance where you can. For example, if their benefits are remaining the same (or improving), emphasize that fact. If their jobs are not at stake, communicate that immediately. Write clearly and openly about how the merger will affect their day-to-day operations.

4. Direct further questions and concerns to HR.

Make a note at the end of the letter directing your employees to your HR person or department should they have additional questions or concerns. If you've scheduled a meeting to address the merger in person (which you should), alert them of that so they know when to attend and to bring questions. You want them to feel heard and valued, not left in the dark.

Now that you know what to include in your letter, here are some great samples to follow:

The role of internal communications in M&A

Mergers and acquisitions can be great ways to accelerate growth, but when they fail to produce the desired result, a common factor is poor communication, including a lack of information during the pre-merger period and a lack of post-merger cooperation and coordination.

When a transaction is announced, employees often speculate, and many companies become rumor mills. The first thought for many employees is, "Will I still have a job when all this is over?" This can cause panic if they aren't getting the answers they need.

Some rumors are just worries and relatively harmless, but other stories or even media leaks can damage the company and cause valuable employees to jump ship. Uncertainty due to poor communication will not only lead to time-wasting rumors, it will also impair employee engagement, reduce motivation and work quality, and ultimately impact the company's bottom line.

Whether you're buying or selling, it's important to keep your employees in the loop by communicating openly and effectively. Here are four reasons why you should control the flow of information and develop a thorough employee communications plan before a merger or acquisition.

1. Employee loyalty and trust are at stake.

How a company communicates during a transaction has a direct impact on its employees' loyalty and trust. When inconsistencies exist between what a company says and how it acts, employees often lose faith in the organization.

"One of the great ironies of M&A activity is that trust, a key ingredient for business success, often quickly dissolves, as M&A activity is usually cloaked in secrecy," wrote M&A consultant Jennifer J. Fondrevay in Harvard Business Review.

Since employees often feel blindsided when a deal is announced, company leaders and other internal communicators can minimize the negative impact of M&A by creating a proactive communications strategy. The communications team should prepare messages for target audiences, develop a timeline for announcements, and appoint or apprise company spokespeople. There should also be a contingency plan in place for unexpected events. Employee trust is too costly to lose. [Read related article: How Business Transparency Empowers Your Company]

2. Your best employees can leave at any moment.

Since people at both companies are concerned about their job security and responsibilities, employees want to know what changes are coming and when. Legal regulations can make it difficult for executives to be transparent, but when management haphazardly says that "nothing will change" in an effort to keep employees motivated, trust will be damaged when things do, in fact, change.

If employees are kept in the dark or lied to, even unintentionally, many will choose to leave. Mass talent departure is one of the reasons M&A deals fail post-acquisition. In an effort to prevent your best employees from leaving, share information early and often. There are many ways to discuss a deal without sharing protected or false information. If you don't have certain information yet, be transparent about that as well; hearing "I don't know" is often more comforting to employees than pure speculation.

3. Company culture is at risk.

During a transaction, your company culture will be affected whether you want it to be or not. When two companies' philosophies and values do not match (known as culture clash), M&A deals often fail. According to Deloitte, "culture is inextricably linked to performance, especially in an M&A context. The question is not if – but how – companies should manage culture to safeguard the value of an M&A deal."

To minimize culture clash between two merging companies, work to develop a cohesive culture. Your communications teams should create a strategic plan to convey the values and vision of the newly joined organization. Company leaders, spokespeople, public relations teams and marketing professionals should all use the same messaging. Consistency is key to unifying a company. [Read related article: The Secrets to Building a Winning Team Culture for Your Business]

4. Post-acquisition success is difficult to achieve.

M&As can be long, complex processes. These transactions can have a significant impact on employees – increasing stress, anxiety and uncertainty. After the deal closes, internal communicators need to maintain the momentum, minimize culture confusion and work to improve employee morale.

The failure rate of mergers and acquisitions consistently falls between 70% and 90%. This doesn't mean deals aren't closing, but that they're closing and then failing to deliver the results stakeholders expect. Researchers have found that frequent and open communication is central to post-deal integration and value creation. Don't forget to communicate early as well as more often after the deal is signed.

Employee communications: Mission-critical

If a company fails to communicate effectively during a merger or acquisition, it risks its employees' loyalty and trust, employee retention, company culture, and long-term success. Effective communication is critical during M&A for four primary reasons:

  1. Frequent communication reduces uncertainty and maintains a trusting relationship with employees.
  2. Proactive communication can ease concerns about job security and help retain valuable employees.
  3. Intentional and consistent messaging can cultivate a unified company culture.
  4. Open communication can facilitate post-deal success and long-term profitability.

Whenever a merger or acquisition deal is on the table, keep your employees in the loop as much as possible to help ensure your M&A becomes one of the 10% to 30% that succeed.

Sammi Caramela contributed to the reporting and writing in this article.

Image Credit: UfaBiz/Shutterstock
Michael DesRochers
Michael DesRochers,
business.com Writer
See Michael DesRochers's Profile
I'm the founder and managing partner of PoliteMail, a provider of email measurement and analytics software for Microsoft Outlook and Exchange. We help internal communications teams measure the effectiveness of their emails to employees. Before founding PoliteMail, I was the founder and CEO of MicroArts, which was acquired in 2001 by Cordiant Communications Group of London for $85 million.