Mergers and acquisitions (M&A) can help organizations become more efficient, profitable and powerful.
Therefore, mergers and acquisitions have become relatively frequent events in the business world. Companies are now merging more often than ever before, and all these actions have the same goal — to improve business performance.
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Even though mergers and acquisitions are not uncommon, a lot of organizations still struggle to implement these changes smoothly.
Internal communications (IC) departments should play one of the most important roles as their responsibility is to align all employees with the overall business strategy.
In this blog, we will discuss how internal communications can help deliver more efficient and seamless mergers and acquisitions.
The Definition of Mergers and Acquisitions (M&A)
Mergers and acquisitions, also known as M&A, is a term commonly used to describe a consolidation of companies or assets through different types of financial transactions.
Difference Between Mergers and Acquisitions
Even though terms "mergers" and "acquisitions" are often used interchangeably, they do have slightly different meanings.
While a merger happens when two companies combine together to form one company, acquisitions happen when one company is taken over by another company.
An example of merger would be Disney and Pixar merging together to collaborate more easily. An example of acquisition would be Google buying Android for 50 million dollars in 2005.
Let’s take a deeper dive into the main differences between mergers and acquisitions.
What are Mergers
Mergers are events in which two or more companies take a decision to come together and have the same strategic goals. The most common reasons why companies merge is to share information, technology or other resources thereby increasing the overall strengths of the company.
In many cases, mergers also help to overcome existing challenges, reduce weaknesses and gain a competitive edge in the market.
Companies that merge together usually consider each other of equal stature and hence they help each other out to create a synergy.
Therefore, mergers mostly happen on friendly terms which makes restructuring easier for both directors and employees.
What are Acquisitions
Acquisitions are events in which one company acquires another company.
In most cases, the company that is financially stronger acquires more than 50% of shares to take over another company. Unlike mergers, acquisitions don’t always happen as a mutual decision which often leads to conflicts and tensions.
In acquisitions, transitions are not always smooth as the company that takes over can control all the decision making on staffing, structure, processes and resources.
4 Main Types of Mergers and Acquisitions
There are 4 main types of M&As, and they are mostly based on the overall goal that the companies are trying to reach together.
Let’s take a look into those 4 main types.
Horizontal mergers and acquisitions happen when companies with similar products or services come together with the main goal to expand their offerings or markets.
Vertical mergers and acquisitions happen when companies in the same industry but different roles in supply chain join their forces.
Two companies integrate vertically to improve logistics, consolidate staff or reduce time to market their products or services.
A good example of vertical merger or acquisition is when a clothing retailer buys a clothing manufacturing company.
Conglomerate mergers and acquisitions happen when companies in different industries join their forces. The main reason why companies come together this way is to broaden their range of services and products, reduce expenses or reduce risks by operating in a wider range of industries.
Concentric mergers and acquisitions happen when two companies share customer bases but provide different services.
Most commonly, the two firms operate in the same industry but do not have a mutual relationship such as a buyer-seller relationship.
8 Employee Related Challenges with Mergers and Acquisitions
Mergers and acquisitions create special challenges in corporate communications. Any change in corporate control brings new strategic directions, business priorities, organizational dynamics, and values that need to be conveyed.
Moreover, the most common challenge in the event of merger or acquisition is how people will accept it and how organizational alignment will be handled.
Most people don’t like change. Therefore, mergers and acquisitions are mostly not so welcomed by employees.
Here are the main employee related challenges companies face before, during and after these changes.
1. Forming an M&A team
One of the most important prerequisites to successful mergers and acquisitions is deciding on who will take responsibility and accountability.
Yet, many organizations fail to do so.
We see, more than ever before, internal communications departments play a crucial role here. IC, together with great leadership, should act as a business partner responsible for reaching all employees, engaging them and aligning them together.
2. Communicating changes to the employees
Business communication is crucial for every company’s success, and this is especially true when big changes are happening.
Communication challenges are one of the top factors that cause company synergies to fail in mergers and acquisitions.
During these processes, employees and management are generally left in the dark. Consequently, fear and lack of answers prevent top leaders from providing the information that employees need and expect. Most employees will ask themselves:
- “Why is our company is merging?”;
- “How will the merger affect my work?”
- “What support will I receive during the merging process?”
Such poor communication creates distrust and uncertainty in the workplace, and it often leads to lower employee engagement and productivity levels.
3. Reaching all employees
As mentioned earlier, geographical and language barriers make M&As difficult. Reaching all employees on all different locations may be very challenging especially if the companies are not using the right internal communications tools and solutions.
However, reaching all employees is a crucial step as alignment among employees in different parts of the world is only possible if they are all engaged in the same conversation.
4. Keeping employees motivated
During M&As, employers need to examine the consequences of the human perspective and especially the impact on employee motivation.
Changes caused by mergers and acquisitions affect the organizational climate, work assignments and group dynamics which can have significant effect on employee motivation.
5. Aligning cultures
Due to the growth in globalization, many mergers and acquisitions involve companies from different countries coming together.
In these situations, companies are exposed to foreign markets and cultures that they don’t have any experience with.
For this reason, cultural and language barriers can have a significant impact on the overall success of the M&A. In fact, various studies conducted on the outcome of M&A’s show that 30% of them fail within three years. The majority of them fail due to the disparities in organizational culture.
6. Aligning employees together
Employees coming from different organizational cultures may have completely different set of behaviors. For example, employees from an organization with core company values such as conservatism, efficiencies and playing it ‘safe’ will be very different from companies that are daring, diverse and creative.
These two companies could fundamentally be different on every level, including formality, philosophies and operating styles.
Therefore, it is crucial to align employees from both sides and help them work together.
7. Building trust
Apart from the differences in corporate cultures, mergers and acquisitions often rise trust issues.
When companies are merging, employees on both sides may feel reluctant to work with each other. As changes in leadership are not uncommon during M&As, employees often struggle to trust the new leaders.
In fact, 63% of employees don’t trust their leaders, and that number increases exponentially when a completely new person takes over.
8. Retaining employees
M&As often bring major structural and cultural changes which may lead to stress, disorientation, frustration and confusion among employees. Uncertainty and other negative emotions can cause several negative outcomes such as employee turnover.
Voluntary turnover of key people is one of the major concerns during every M&A process. Employees are often insecure about their position and role in the new working environment, which is why many of them decide to leave.
For these reasons, keeping employees in the workplace is one of the main company goals during mergers and acquisitions.
How Internal Comms can Make Mergers and Acquisitions More Successful
Every merger or acquisition brings change. Organizations should provide employees with change management knowledge, processes and tools that enable the organization to move through the stages of change with the least amount of loss and disruption.
When disruption can not be avoided, these organizational change tools and processes can help individuals better support themselves and their colleagues so that employees feel less victimized and more in control.
Internal communications departments have a critical role in this.
As making people aligned and informed is one of the biggest M&A challenges, it makes a perfect sense for IC to contribute in making this change as seamless as possible.
So let’s take a deep dive into how internal comms can make this happen.
1. Take ownership
Yes, M&As are not easy to handle. However, internal communications teams should be the ones responsible for delivering the right message to the right people at the right time.
As IC’s main goal is to always inform employees on the important changes within organizations, it is logical for them to take leadership and ownership over aligning people together during mergers and acquisitions.
2. Help people understand the change
As employees see change as dislocating and upsetting, internal communications departments must communicate effectively and openly with all employees throughout the transition.
Specifically, IC should communicate with employees about the necessity for the change, explain how the change will benefit them, and manage the stresses that accompany change.
3. Keep employees informed
Communication in the workplace is crucial for the overall business success. However, communication skills are one of the hardest ones to learn.
When managing projects such as mergers and acquisitions, it’s important to keep the employees on both sides informed at all times. Internal communications should inform the employees of the progress of the integration.
IC teams should always be aware of all the questions, concerns and fears that employees might have. In addition, they should proactively communicate the answers in order to build trust.
4. Get everyone on board
Data from research shows that communications around mergers are not customized enough to meet employee needs.
Much greater efforts are spent customizing the message for the top levels of the company such as board of directors and top management who already believe in the merger.
Far less effort is spent on regular employees and middle managers, where more convincing may be needed.
Therefore, internal comms teams should put more effort into bringing employees, together with leaders, on board with the change.
5. Be transparent to build trust
Being honest and transparent at every step of the M&A process is crucial to build trust and keep employees engaged.
Every merger and acquisition has its advantages and disadvantages. For example, job cuts are often the biggest disadvantage.
IC departments should do their best in communicating both sides to the both parties.
Keeping secrets and communicating only the positives can have a contra effect later on in the process.
6. Make important information easily accessible
Internal communications should always strive towards reaching every employee with relevant information.
Ask yourself: “Can my employees, at all times, easily find information and important messages related to the change?”
All the relevant information should be in one place and it should make sense to employees. Therefore, leaders and IC department should be able to, with the right communications technology, structure and group content based on relevance and importance.
7. Support two-way communication
Internal communications and leadership should not be the only ones talking during mergers and acquisitions. Moreover, employees should be able to express their thoughts, feelings and concerns.
Empowering your employees to speak up is a great way to understand the challenges that companies should focus on during the M&A implementation.
8. Make communication seamless
One of the biggest challenges internal communications face is to keep the flow of information simple and efficient.
If employees need to put too much effort to locate the information IC department wants to deliver, the engagement will drop significantly.
As a consequence, employees will feel even more frustrated and concerned. Provide an easy and fun way to connect your people by enabling them to access information, share it or comment on it.
9. Eliminate miscommunication and discrepancies
If employees get different messages from different people, trust will be lost. Still, many employees say that messaging during mergers and acquisitions are not credible as they get different information from different people.
It should be internal communications’ role to align these messages and to make sure that all employees get the same, trustworthy information.
10. Implement the right communications technology
Seamless communication is hard without the right technology.
Choosing the right communication channel to inform employees about the change is crucial for successful M&As.
Today’s employees expect an instant and easy way to communicate and find all the important information. Emails, for example, are not the right communication channel as a lot of information that employees receive on their emails do not require immediate attention.
This causes important information to get lost and overseen.
Make sure that your internal communications solution is mobile friendly, that it supports two-way communications and that it enables your employees to find important information without frustrations and much effort
Make M&As More Successful With Smarp
Smarp is a mobile-first employee communications platform designed to help companies improve internal communications, align and connect employees no matter where they are located.
During mergers and acquisitions, communication is crucial, and Smarp is here to help you deliver important information to all your employees.
Companies use internal communications technology like Smarp to really excel their M&A efforts and make them much more efficient and successful.
By connecting all of your internal communications tools and making communication mobile-friendly, Smarp has helped organizations across the world eliminate common M&A challenges.
Schedule a Smarp demo to see how our solution is helping organizations across the world to boost their internal communications efficiency.