October 20, 2019
4 min read
I work with many companies going through mergers and acquisitions. And I see rigorous processes in several areas. Companies work on the deal for a long time, looking at the economics using different models to determine the best price to pay. They calculate the most advantageous tax structures. They’re also concerned with intellectual property and other legal considerations. All of this is essential.
But what CPAs and lawyers don’t tell you is that when you complete an acquisition you get a couple of things for free with your purchase: frightened employees and concerned customers, and both can have a major effect on the success of the deal.
A company enters into an acquisition so they can make money. More often than not they are looking to either gain market share or acquire new technologies. By and large, mergers and acquisitions happen with growth in mind. But growth doesn’t happen on its own. Companies need to communicate to key stakeholders. Customers. Employees. Investors. Vendors. Community. These important stakeholders will be very interested in the deal and can greatly influence its success.
Part of what might be told to investors is that they will save money on personnel by merging two companies. Naturally there is going to be a lot of apprehension and stress in the acquired company regarding job security. Your best employees will have options. If you don’t communicate with them effectively, they’ll be gone.
Another concern: customers might not necessarily want to work with the acquiring company. Customers often assume two things when one of their vendors gets acquired: prices will go up, and service will suffer. They may have had a strong relationship with the company that was bought and may not see any value associated with the acquiring company. A big reason for an acquisition is to gain market share, but that doesn’t do any good if customers leave.
These two examples reveal the need to communicate the benefit of the acquisition to different audiences—what they need to hear and what you need to tell them. How are you are going to add value to their lives? With you buying this company, what is in it for them? Many companies sadly don’t do this.
Communicating the acquisition value should be a primary focus and there are a host of questions to ask immediately to begin formulating an effective communication plan, like:
Also, think about how you are going to talk about the merger or acquisition over time. For instance, at the 1-year anniversary, it’s essential to communicate success stories to all of your stakeholders. This can help stock price, it tells employees you accomplished what you set out to do, and it can prove to investors through actual proof points the real benefits of the deal.
In addition to communicating the value of the merger or acquisition, something that cannot be stressed enough is knowing the brand of the company you will acquire. I recently worked with a company that acquired a wellhead business that had some catastrophic failures in the market, but overall its technology was good, so it passed the technological reviews by the engineering teams. Still, market perception of the technology compromised the brand associations. Since no one was really exploring the acquisition’s brand and market perception, the acquiring company overpaid for the deal, and market growth was extremely slow.
The company kept the legacy brand name in place, and no matter how much engineering improvements they poured into the product line the specter of past failures still hovered over the brand.
Finally, the acquiring company rebranded the product under the parent brand. Trust in the product was almost immediate, and today the company is getting the market share they wanted in the first place, even outpacing the competitors in that market—just by rebranding the product.
If you are going through a merger or an acquisition, you really need to think about how you are going to communicate to everyone involved. You’ll also need to explore the brand of the company you are getting into business with. And please, put a line item in your budget for this research and communication. It’s not cheap, and you need to be prepared for it, but in the end it’s a lot less expensive than a bad deal.
Positioning outlines why your product is unique in comparison to market alternatives, and messaging describes to your target segments what you’ll do to deliver on the promises made in your positioning statement. It is a powerful one-two punch, and you need to be able to communicate yours before you start spending money on tactics.
Properly understood, the job of a marketing department is to drive revenue for the company. Some marketers do so by building and maintaining a brand, others focus on generating new leads, and others still focus on enabling sales to close more quickly and consistently. A good company with a mature marketing department does all of these things, even if they focus on some areas more than others. But there’s one area of revenue generation where the marketing department is often relegated to a passive participant or even outright excluded: pricing.
Companies everywhere are looking to cut overhead and other costs to keep up with a changing market and an economic recession. That usually means that marketing budgets are the next to go. Much like during the pandemic, businesses will have to pivot and discover new marketing solutions to combat the economic recession, inflation, and other market changes.
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