How to Handle Internal Communications During a Merger

How to internally announce mergers and acquisitions 

If you are getting ready or currently going through a merger or acquisition, it’s understandable to have questions about how to communicate this change to your employees. It’s important to plan your communication strategy, according to David Olsson, managing director at the Institute for Mergers, Acquisitions and Alliances (IMAA). Communication strategy includes the timing of the announcement and who will make the announcement – ahead of time. It’s a good idea to nail down your integration plan before announcing the deal, since the communication strategy will stem from that, Olsson said.

“You’ve got all of that pre-deal work … to think [about], ‘Why are we buying it? What’s it going to look like? What’s the plan? Who’s going to lead it?” Olsson said. “And then, out of that will come your content. And it’s up to your comms team, or whoever is leading that side of the process, to really wordsmith it carefully.”

Then, leaders should think about how to deliver the message in a clear, concise and consistent way, Olsson said.

“[Consistency] is one key factor in that whatever you’re saying externally has got to match what you’re saying internally,” Olsson said.

While your communication may be unique to your workplace culture or the M&A process, being transparent through internal company letters is crucial to success. Your M&A letter to your staff should follow this format:

1. Announce the merger.

The first part of your letter should be the announcement of the merger or 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 clarify any confusion, anxiety or rumors surfacing. It should outline the timeline of the merger or acquisition and provide details about both companies, including the steps for moving forward.

The announcement should come directly from the company’s leader, Olsson said.

“It should be the leader saying it because they’ve got to sponsor it,” Olsson said. “There’s going to be so much change going on that they’ve got to own the challenge.”

2. Describe the reason for the merger.

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.

“There needs to be a compelling reason to purchase the company,” Olsson said. ‘The ‘why’ is everything.”

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 – even the uncomfortable ones – upfront by describing any immediate changes affecting employees. 

Also, offer reassurance where you can. For example, if their employee benefits will remain the same (or improve), emphasize that. If their jobs are not at stake, communicate so immediately. Write clearly and openly about how the merger will affect their day-to-day operations.

There are misperceptions about mergers and acquisitions that they always involve job loss, which is not always the case, said Christopher Kummer, IMAA founder and CEO. When possible, leaders should try to emphasize the benefits of the merger, but if job loss is anticipated, leaders should take ownership of the announcement.

“There are cases where it’s not so nice for some of the people, and we’ve seen lots of executives fail to communicate this themselves,” Kummer said. “They’d rather go through HR or legal. But I think it’s a matter of leadership to go there and deliver this message yourself, even if it’s not a nice one, as sad as it is.”

4. Direct further questions and concerns to HR or another point person.

Make a note at the end of the letter directing employees to contact your HR person or department – or another designated point person in leadership – with any additional questions or concerns. If you’ve scheduled a meeting to address the merger in person (which you should do), alert them, so they know when to attend and bring questions. You want your employees to feel heard and valued, not left in the dark.

Ensure “there are channels [for employees] to come back and say, if you have a question, ask this person,” Olsson said. “So internally, you’ve got to know, who are those people?”

Why internal communications are important during mergers and acquisitions

Mergers and acquisitions can be a great way to boost business 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 relatively harmless, but other stories or media leaks can damage the business and increase the employee turnover rate. Uncertainty due to poor communication will not only lead to time-wasting rumors but also impair employee engagement, reduce employee motivation and work quality, and ultimately impact the company’s bottom line.

If managers don’t know how to answer questions from workers, “immediately, you’ve got that vacuum,” Olsson said. “And as soon as you have a vacuum, gossip and rumors and everything else can come into play. So again, it’s having a really clear plan, and having a timing of when the comms will be going out as well is really important.”

It’s essential 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.

Employee loyalty and trust are at stake.

How a company communicates during a transaction directly affects its employees’ loyalty and trust. When inconsistencies exist between what a company says and how it acts, employees often lose faith in the organization.

Because employees often feel blindsided when a deal is announced, company leaders and other internal communicators can minimize the negative impact of a merger or acquisition by creating a proactive communications strategy. The communications team should prepare messages for target audiences, develop an announcement timeline, 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: Leading With Transparency Promotes Customer Loyalty]

Your best employees can leave at any moment.

Because 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. Still, when management haphazardly says “nothing will change” 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 reason M&A deals fail post-acquisition. 

“If there is a plan for internal headcount reduction, and you’ve said there’s not, that’s really not a good look,” Olsson said. “And so, the employees that are even not affected will look at that leader and think, ‘Well, I no longer trust you.’”

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 specific information yet, be transparent about that as well; hearing “I don’t know” is often more comforting to employees than pure speculation.

Company culture is at risk.

Your company culture will be affected during a transaction, regardless of whether you want it to be. When two companies’ philosophies and values do not match, known as a culture clash, M&A deals are at risk of failure. Because strong culture leads to better organizational performance, companies should keep culture issues in mind to enable a successful merger.

Work to develop a cohesive culture to minimize culture clash between two merging companies. 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 one of the keys to unifying a company.

Post-acquisition success is challenging to achieve.

M&As can be long, complex processes. These transactions can affect employees significantly, 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.

About 30 percent of deals succeed, Olsson said, meaning they transact and achieve all stated goals. Another 30 percent fail and actively damage shareholder value. The remainder fall somewhere in between; this doesn’t mean deals aren’t closing, but they’re closing and delivering mixed results when it comes to stakeholder expectations. Frequent, open communication is central to post-deal integration and value creation. Don’t forget to communicate early and more often after the deal is signed.

Communication mistakes to avoid during mergers and acquisitions 

If a company fails to communicate effectively during a merger or acquisition, it compromises its employees’ loyalty and trust, employee retention, company culture and long-term success. Avoid the following pitfalls when communicating plans for your merger.

1. Not communicating enough. Infrequent communication can cause uncertainty and damage the trust between employers and employees.
2. Reactive rather than proactive communication. Waiting for employees to come to you with their questions before you communicate can contribute to team anxiety. Anticipate concerns about job security and offer answers to common questions proactively to help retain valuable employees.
3. Using inconsistent communication. Not taking the time to plan your communication strategy ahead of time can lead to inconsistent communication. Plan your communication strategy ahead of time so leaders provide consistent messaging to their respective teams. 
4. Discouraging feedback. Failing to provide employees with avenues for questions and feedback can lead to resentment. Open communication facilitates 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 your M&A become one of the 30 percent that succeed.

“You’re making sure that there is a consistent good news story going through,” Olsson said. “Quite a sweet way of thinking about it is to say, ‘Is there a better together story?’ And that’s quite a good thing to do, because otherwise, if you leave gaps in the comms, people make their own ideas up.”

Erin Donaghue and Sammi Caramela contributed to this article.