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Navigating Communication Challenges for Dealmakers in the Digital Age
The following is an extract from The Deal Paradox.
Good communication is crucial to deal success, but today’s multichannel world makes it increasingly hard to control the narrative. We’re now in a world where, increasingly, even those doing all the right things in terms of communication are still liable to be blown off course by forces beyond their control.
There are a few factors reshaping deals, from the need for acquirers to move out of their comfort zone, to the push to carry out more deals at greater speeds.
Here, the impact on communication is clear. The fact that companies are now increasingly likely to acquire outside of their industry sector or geographic market is likely to present greater communication challenges. This is because your current investors and employees may need to take more of a mental leap to see the benefits of acquiring a company from a different area than if you were, to use a sports analogy, playing at home.
Similarly, strong competition for hot targets, particularly those with tech capabilities, means acquirers must act fast, putting greater pressure on communication teams if they are to stay ahead of developments.
There are, however, three areas where changes in dealmaking and the deal environment are presenting more complex communication challenges. These are all worthy of greater investigation, particularly as they are all related to technology.
In the technology age, communicating with people matters more
Using a broad-brush stroke to paint a picture of deal trends, we can identify two different types of deal. The first is a more traditional one, which involves a company buying a rival in order to boost market share and create cost synergies by eliminating areas of duplication such as production and sales channels. The second, and increasingly common type of deal, involves a larger company buying a smaller one, sometimes in a different sector, in order to get the capabilities that will help the buyer remain relevant in a rapidly changing business world.
Now, it doesn’t take a genius to work out that those vital capabilities in the second deal category will be far less effective if the people who actually design, manage and maintain those capabilities aren’t still on board, post-deal.
So, while the traditional deal model often involves making people redundant because their positions and capabilities were surplus to requirements in the new parent organization, the second deal category, often motivated by the need to build technology capabilities, is more about retention. Here, it’s a paradox that the growing importance of technology is actually making people more central, increasing the need to retain them during and after an acquisition.
In terms of the impact on communications, the PR messaging has gone from being all about managing the bad news that a significant chunk of employees may lose their jobs, to motivating people to stick around for the so-called ‘happy ever after’. In other words, it’s gone from redundancy to retention, and from staff worrying about hanging onto their jobs to the acquirer worrying about hanging on to staff.
And those acquirers have every reason to be worried. A study by J. Daniel Kim found that over one-third of acquired workers leave in the first year after their company is acquired. Although the study focused on the technology start-up world, and as a result is not representative of the wider business, it is very much relevant given the trend towards companies acquiring technology capabilities, which is making even the biggest players do their ‘shopping’ in the world of early-stage companies.
So, with the prospect of losing a third of your prized talent within a year, there is a very strong incentive to communicate clearly and effectively with those employees before, during and after the deal.
More stakeholders matter more
A dealmaker and their PR team would probably split the communications challenge in two.
The first stage is about building support prior to the announcement of the deal. That involves communicating with your own institutional investors and also, ideally, those of the target company. It’s about getting your message in front of them ahead of anyone else, ensuring that the news of the deal doesn’t come as a surprise and just as importantly selling the story in terms of why the deal will be a good strategic fit. Reputation is also key here because, no matter how good the story, if the key players aren’t trusted, then the audience is unlikely to go along with it. So, a lot of this stage is about careful preparation, from shoring up a reputation to carefully honing messaging and plans.
The second stage, post-announcement (or leak), is much harder to control because the deal is now public knowledge. Investors may still be the primary audience, including activist shareholders (those who want the company to take a specific action to improve performance) but there are also plenty of other players to consider, all of which will have their own take on the bid as well as the power to damage or even derail it.
Whether it’s the rise of so-called stakeholder capitalism, which means a company must now satisfy the needs of everyone, from its employees and customers to society and the planet, or simply because of greater levels of public awareness, the simple fact is that dealmakers must prepare for challenges from more sources. From energy and technology security to carbon footprint and diversity, the deal will likely be examined from every angle and anyone or indeed everyone may have an opinion – as well as a platform to air it.
Technology platforms drive change
That brings us nicely onto the final and by far the most important change in deal communication – the rise in what we could call social media channels, or, more broadly, self-publishing or unfiltered communications.
In one way, this is nothing new: Facebook launched in 2004, Twitter in 2006, and both were preceded by the likes of GeoCities, Friendster, MySpace and Second Life, plus all the manner of online message boards and chat rooms. The real difference today, perhaps, is the way those channels are being wielded and by whom. Early Twitter was seemingly the website of choice for pop stars or bored teenagers but by 2018 the President of the United States was using it to set foreign policy, victims of workplace harassment were using it to bring down media empires and, in 2022, Elon Musk was using Twitter to announce that he was buying Twitter itself.
It’s also a very public form of debate, which might sound like no problem for the experienced communicator but when you think about traditional deal comms, they tend to be tightly controlled, almost entirely one-way and all emanating from the CEO and board. What happens when the bit-part player, whether that be a disgruntled employee or an investor with an agenda, now has access to the same megaphone? Worse still, what if a country’s Takeover Code regulations mean your comms team can only make announcements at certain times depending on when public markets are open, but your dissenting voices can do what they want whenever they want and wherever they want?
That ongoing tension between the need to control the narrative and the difficulty of doing so in our technology-driven, multichannel 24/7/365 world is the biggest challenge. It also has a clear mirror in storytelling, where the traditional narrative is now coming under fire from audiences who increasingly expect greater interaction and power over outcomes.
They don’t just want to be sold a story; they want to be part of the action.