Practicing strategic communications as a catalyst for successful M&A transactions

B.J. Talley is the Founder & President of Gladius Communications.

Mergers & acquisitions (M&As) can generate incredible opportunities and are an essential part of the growth strategies for many organizations. They can also be high-pressure, high-stress transactions with a wide variety of hidden risks and obstacles. The closing of an M&A transaction may feel like “the end,” but once the funding has changed hands, the detailed process of ensuring post-closing success begins.

The harsh reality of employee engagement during a transaction and the subsequent integration is that nearly one-third of acquired workers will leave in the first year after acquisition at a rate three times higher than traditional new hires. We know why they typically leave – a perception that compensation is unfair, lack of alignment with the new organization’s culture, or are uncertain about their job status.

And when they leave, that’s like losing investment twice – especially if part of your deal rationale was the value of the acquired organization’s skilled labor and technical expertise. With low retention, you’ll need to expend resources to hire new personnel, and will likely suffer productivity challenges in the meantime. Strategically engaging employees can not only retain more staff, but activate them as advocates with customers, regulators, and communities.

Key stakeholders must understand what’s expected of them, what’s changing, and what’s staying the same. Using a “hierarchy of needs” approach to ensure you’re first listening and addressing transitioning employees’ core concerns (pay, benefits, job security, efficacy), allows you to build upon that foundation to communicate operational, cultural, and corporate information later. By deploying a communications strategy leading up to and continuing after closing, you can simultaneously mitigate the type of risks that can sabotage the value proposition of your newly closed deal and identify opportunities for synergy or unlock new growth. More importantly, since it’s unlikely many of your competitors are investing in strategic communications for their transactions, it can give your organization a competitive advantage.

Case in point: When food giant J.M Smucker acquired industry rival Hostess Brands in 2023 for $5.6 billion, CEO Mark Smucker told Axios that the massive integration effort was supported by detailed communications strategies, saying, “We’ve done many of these in the past – and when they are successful, it’s because we communicate.”

The benefits of incorporating strategic communications during M&A transactions

1. Improving retention by keeping employees calm, confident, and informed. I recently worked with a client in the healthcare space who was closing three simultaneous deals, all with roughly the same rationale, incentives, and profile. The corporate development leaders for two of those transactions asked for communications advice and assistance before and through closing. The third did not. The client’s average retention rate for employees in a transaction was around 75% – meaning that about 3 out of 4 acquired employees who received offers to stay on post-closing accepted. The post-close employee retention rate for the two deals that included strategic communications in the planning process averaged 94%. By comparison, the one that didn’t include a formal communications plan had a retention rate of just over 60%.

It’s vital to talk directly to impacted employees – as either the acquiree or acquirer – in an honest, engaging, and forthcoming manner during an M&A transaction. You get one shot to establish – or destroy – trust, credibility, and affinity, so don’t waste it.

2. Managing customer concerns. As vital as internal communications are post-close, you also need a strategy for external customer outreach, many of whom operate from an assumption that any acquisition will mean disruptions, degraded service, and higher costs. Giving customers inaccurate, late, or no information during a transaction is an invitation for the competition to swoop in to capture your customers and talent. Only credible, aligned, and timely information direct from the acquirer and acquiree can control the narrative of your transaction and counter competitor propaganda.

3. Enhancing awareness, understanding, and adoption of operational processes. Communication is critical for ensuring that acquired employees adopt your organization’s policies, procedures, and best practices as soon as possible. But it’s not just about blasting transitioning team members with volumes of one-way information. A strategy that involves two-way channels will allow your new team members the chance to educate your existing personnel on processes they’ve found to be efficient and effective. After all, an acquired company’s synergies, operational advantages, and innovation are likely part of why you initiated a deal in the first place.

4. Accelerating cultural connection. Failing to quickly make new employees feel like part of your team is one of the surest paths to poor retention numbers, operational inefficiencies, and not reaching your post-close accretion targets. An effective employee engagement strategy throughout closing and integration will make incoming team members feel included and confident about the information they need to do their jobs, stay safe, and be informed.

5. Providing an early warning system. Good communication flows both ways, and an effective transaction communications plan incorporates both broadcasting information and listening to stakeholders. Whether it’s a digital suggestion box, pulse survey, focus group, town hall, or skip-level meeting, employing strategic listening channels helps employees feel empowered to speak out. They know their jobs, customers, work environments, and the associated risks and opportunities better than anyone. Effective two-way channels can also help better detect and address minor issues before they become more extensive crises.

Using communications to drive M&A success

If corporate transactions are new to you and your team, engage the help of an outside consultant with M&A communications experience to help you build that capability.

If you’re a communications professional at an organization with M&As on the horizon, contact your corporate development and business operations leaders to get involved in current or future transactions. These strategies make a strong business case that utilizing communications is a cost-effective way to protect their investment. Remind leaders that, ultimately, the personnel on both sides of the deal will play a key role in its success.