The new rules for talking about M&A

The new rules for talking about M&A

The fog of uncertainty attached to Brexit has made 2019 a quiet year so far when it comes to large scale mergers & acquisitions (M&A) activity in London.

Whether we have a hard Brexit, a soft Brexit or no Brexit at all, the time will come when companies can plan with greater certainty. There is every prospect of a return to at least the sort of corporate deal flow witnessed in preceding years.

When that time comes, the core communications lesson that parties to M&A activity must remember is this: transactions now take place in contested communications environments where the financials of a deal are not enough to guarantee success. Businesses must speak to a greater number of societal goals, and to a greater number of audiences, when they are setting out the prospectus for their deal.

This situation has been driven by structural factors: economic events in recent years that have led to a significant loss of trust in corporates, coupled with the democratisation of communications channels, meaning that traditional flows of information can be disrupted and shaped. Frankly though, many bosses and boards have not helped themselves in this context by being slow to react and have followed old-school financial PR methods that have passed their time.

The results have been clear to see to anyone observing the market in the last few years. From the scrutiny attached to the unsuccessful merger between Sainsbury’s and Asda this year to the dynamics of 21st Century Fox’s battle with Comcast to acquire Sky last year, companies that struggle to communicate a sense of social purpose to their transaction will face a hostile environment from MPs, from journalists and from the general population.

This in turn shapes the environment through which shareholders make decisions, and through which regulators give a deal the thumbs up or the thumbs down.

It is therefore perhaps unsurprising that new research from Portland, published today, underlines the level of interest seen in mergers & acquisition activity.

The ten largest deals in the UK in 2018 received 53.9 per cent more mentions on social media than three years ago in 2015; and 30 per cent more mentions by influential accounts such as those run by MPs and journalists.

Businesses are not impotent against the tide though and can adapt to this new environment. But to be successful they must do three things:

  1. Communications must be front and centre of conversations about deal strategy. Analysis of any negative externalities created by M&A needs to be conducted much earlier on in the process. Critically, the advisers tasked must understand the total communications environment of the UK – not least politics – and how traditional investor relations interacts with it
  2. Communications firms advising on a deal must properly understand social media and its role as a fundamental channel to influence audiences. Anyone who is beginning the process of a deal and does not have a targeting strategy on social, is missing a trick. As soon as a deal is announced, customers, employees and industry experts have the power to shape public perceptions with the simple click of a button. Communication and engagement with these groups must start immediately to ensure their loyalty and buy-in
  3. Businesses must have a clear story to tell on how their deal advances societal goals in addition. No one is suggesting that profit no longer matters, but the total value of a transaction – and the importance of long-term value versus short term – needs to be considered and discussed in the round

Every business story will be different but at a minimum they must have a narrative on the following:

  • Corporate behaviour – explaining why any reward for senior executives is justified
  • Livelihoods – making a case why those who depend on the transaction parties for their income will not be adversely affected
  • UK Plc – showing how the deal is good for Britain and does not reduce the country’s national assets in an ever more competitive world

This new way of working of course goes beyond M&A activity and extends to wider corporate interactions with investors. The increasing number of activist shareholders, the possible onset of a more interventionist UK government under Jeremy Corbyn and the European Commission’s recent hardwiring of the sustainable development goals, means that all businesses need a total communications strategy, rather than just a financial communication one. The stakes are too high to ignore this for much longer.

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