Internal communications come to the fore in merger talks

As the Hollywood actress Shelley Winters once said: 'All marriages are happy - it's the living together afterwards that causes all the problems.' Winters was not talking about corporate mergers and acquisitions (M&A), although she might as well have been. After all, two firms that decide to spend the rest of their lives together probably have more need of marriage guidance than even the most ill-suited of human couples.

Their corporate cultures might be diametrically opposed; they are often different nationalities. And their union, which might have been unwelcome to one of the parties, takes place under a media spotlight that would have Kate Middleton running straight to the Press Complaints Commission. Yet despite all this pressure, the companies are often under legal obligations not to say very much internally or externally until everything is signed, sealed and delivered.

But if company A and company B make a mistake at the altar, the consequences can be considerably more far-reaching than a couple of thrown pots and pans followed by a decree nisi. A botched merger can result in thousands of people leaving their jobs and millions of pounds of shareholder value destroyed in a matter of months.

Just consider the recent announcement from German car giant Daimler, which is currently selling its ill-fated US acquisition, Detroit-based Chrysler. Analysts have placed a price tag of $5 billion to $7 billion (£2.5 billion to £3.5 billion) on the troubled car maker; it cost Daimler in excess of $35 billion in 1998.

Getting a merger or takeover right is a big deal and, with every day bringing new rumours of mega-transactions, the issue is becoming increasingly important. But there are many more people than just the directors to consider during the merger process. All the employees in both companies will want to know exactly what is going to happen to them from the first moment a whisper of a merger appears in the financial press.

Good internal communications is what makes the difference between them being excited about the future, and booking a trip to the recruitment consultants.

'M&A activity is driven purely on financial grounds,' warns Peter Christopherson, global marketing director of reputation management specialists Echo Research. 'Often there is a failure to conduct enough due diligence about the culture of the company that is to be created. But a shared culture is so important.'

To outsiders, the process of a takeover or merger looks deceptively simple. The directors get together with some bankers and lawyers, pay huge fees, sign a bit of paper and suddenly two entirely disparate entities become one. If there are shareholders, they might get a say in the matter, but employees do not. So while directors need to look entirely calm about the process, gliding above the water as elegantly as a swan, internal communicators need to be frantically paddling underneath, just to keep the process afloat.

Talking to the hands

Abi Signorelli, head of internal communications at Virgin Media, knows just what it is like to try to inform colleagues during a merger situation. The company was recently formed from NTL, Virgin.net and Virgin Mobile, and had 18,000 employees around the world who needed to be kept informed about developments.

Getting the internal message right was key to the outside perception of the merger, according to Signorelli. 'One of the worst scenarios is having a workforce that's uninformed and unengaged - this immediately translates through to our customers,' she explains. 'It is vital to be up-front, open and honest. That's the only way to encourage trust among our people.'

Ruth Colling, business psychologist at consultancy Nicholson McBride, agrees that engendering trust among employees is a key part of getting a merger to work. Even when there are aspects of a merger that cannot yet be talked about for legal reasons, she says employees will understand - as long as the lines of communication are kept open. 'If people have the sense that you are telling them everything you can, they are usually very understanding,' she points out. 'It is about trust and belief: if they trust and believe you, they will be much more accepting.'

Keeping silent about the changes is not an option, Colling adds. 'Even if you are not communicating, there will still be communication of some sort,' she points out. 'People will make up their own picture of what is going to happen. The rumour mill works overtime and if things are not communicated properly, there can be a real sense of loss of control.'

Getting in first

Paul Middleton, managing director of consultancy Yellow Communications, says it is never too early to start communicating internally about what is going to happen. 'Your people need to know first - they don't want to hear from the media,' he says.

He dismisses fears of confidential information finding its way into the public arena as a poor reason not to tell employees what is going on. 'Yes, things do get leaked and that's life, but they only tend to get leaked when there is no communication in the first place,' he points out.

Experts agree the first thing to work out is whether there is a huge cultural difference between the two businesses that are moving together, and what the shared culture should be going forward.

Daimler executives, for example, were surprised to find that Chrysler's senior staff members were not interested in learning to speak German. While engineers from both companies shared a common standard and working practices, employees from other parts of the business often found themselves at odds with counterparts at the other side of the business.

'It was a case of Mr Staid German and Mr Wideboy American,' admits one insider. Colling says her company often carries out a process called 'cultural mapping' with companies that are merging or being taken over. Both sides talk about what parts of their corporate culture they wish to take or leave when they come together. 'We get each part of the merger to identify what they want to create,' she says.

'It is the communicator's job to take a long hard look at the culture to be created,' agrees Christopherson. He says it is becoming increasingly less common for one company to want to impose its culture on another; mergers tend to work better for employees when the culture is shared.

This avoids headlines like those created when US software giant Oracle bought rival PeopleSoft in 2005. Oracle chief executive Larry Ellison repeatedly told PeopleSoft employees they would be treated fairly in the transition. He specifically cited the importance of PeopleSoft's engineers and sales force, who would be important in preventing a mass exodus of PeopleSoft customers.

However, for many, the clash of cultures proved too much, and it certainly proved irresistible for the media. Ellison was portrayed as the sharp-suited aggressor with a 'take no prisoners' approach, compared with PeopleSoft founder David Duffield, who allowed his staff to wear casual clothes to work and handed out bagels on Fridays.

Headlines such as PeopleSoft is being swallowed by the evil empire did nothing for the company internally or externally, and when displaced PeopleSoft employees started selling their services on eBay, the outside world could see the real cost of a clash of cultures when a takeover doesn't quite gel with employees. Quite simply, people from the company being taken over often feel at a disadvantage and in a weaker bargaining position than their colleagues in the acquiring firm. Signorelli was determined that a similar situation would not happen to Virgin Media when it took over NTL.

'The culture change is not a quick fix - it's about long-term engagement with our people,' she says. 'A key objective was to create a clear and single-minded view of our values and behaviours across a wide and diverse set of people. This wasn't just a comms exercise to inform our people about the changes. It was about bringing it to life, making it real and believable, such that our people started to live and breathe it.'

Her company used new and old technology in order to communicate changes to staff. Virgin Media launched a new intranet site, posted web chats with senior management and sent emails and text messages about changes. It also used badges, desk bugs, posters above urinals and magazines and newsletters in order to get the message across internally.

'We've got a huge array of channels that we've introduced to cater for all our different audiences,' Signorelli says. 'All employees should feel they have access to the information they need in whatever format. We also made sure they received important information in a timely way.'

Communication channels

Other companies have held 'town hall' meetings, where directors and senior management host social gatherings and allow staff to ask them questions directly. Social events that bring together the two companies' staff, and are held even before the final 'I's are dotted on the deal, are also popular. Christopherson says Virgin Media is one of the companies that got it right. 'It seems to have worked with the people within the organisation and has created something absolutely different,' he notes. 'Virgin is very good at knowing how it wants to be perceived.'

Christopherson also believes keeping the lines of communication open, as Virgin did using technology, is absolutely vital. 'People don't like change; they are pessimistic before they are optimistic,' he points out. 'There have to be communication lines in place, and feedback. You have to have get-togethers, blogs or forums - maybe a specific forum for people to speak out about the acquisition.'

Colling says it is important that at least some of these channels allow people to be anonymous when posting views about the merger. 'People feel very vulnerable during change situations and they don't want to ask questions because they are afraid of getting a bad reputation,' she explains.

Looking at the psychology of mergers and acquisitions and talking appropriately is vital, Colling adds. If things are insufficiently communicated 'people will either leave or they will stay and fight', she says. 'That can result in people working through it and feeling positive, or it can result in people digging in their heels and refusing to change.'