The power of traditional media

Social media has minimal impact on a takeover battle but traditional media remains just as influential

Whisper it quietly but, with falling newspaper sales and proliferating social media, some in-house corporate communications professionals now admit off the record that they only bother keeping in touch with a handful of journalists.

This may sound like anathema to seasoned communicators but the logic runs like this: London, with its surprisingly healthy number of national newspapers, is now just one of the global centres that major companies have to communicate with.

Depending on where a company's investors are based, New York, with its much smaller number of national newspapers, may even be more important.

As for stock market traders and fund managers, by far the most important readers in relation to anything affecting the share price, they have their own real-time news sources and usually know about anything price-sensitive long before it is in the newspapers.

And, with global news organisations such as Bloomberg and specialist newspapers like the Financial Times and the Wall Street Journal, growing in dominance, surely it makes sense to focus simply on them?

‘Our investor base is simply not interested in what the financial pages of the Daily Express are saying,’ confides one top in-house communicator. ‘Our audience is global and I can count on one hand the number of newspapers that we need to have relationships with.’

Even if the underlying logic of that approach cannot be faulted, however, corporate communicators say there is one major exception. When takeover bids come along, even the fussiest of communications offices have to take a much broader perspective, they say.

There are sound reasons for such a view. The spotlight shone by takeover bids often puts businesses in the news for unplanned reasons, risking the undoing of many years of careful reputation management work.

In such circumstances, communicators say close relationships with commentators and key journalists across a wide range of news outlets remain crucial. When Alliance Boots was being taken over by private equity firm KKR back in 2007, for example, the pharmacy group's pension fund successfully used relationships with the UK press to further its campaign for a better settlement for its members.

'There was a whole debate about how much money Alliance Boots should put into the scheme to improve its fund,' recalls John Kiely, managing director of Smithfield Consultants. 'KKR was refusing to negotiate with the pension fund and Alliance Boots was saying this was something that could be dealt with after the acquisition. The trustees had very few levers they could pull. The only way they could exert influence was in the Court of Public Opinion, so the UK newspapers were incredibly important.'

Kiely's team, who were acting for the pension fund, set about communicating to pensions specialists, personal finance writers and City commentators on newspapers and magazines.

'Britain's newspapers effectively shamed KKR and Alliance Boots into coming to the negotiating table,' he says. 'These things are quite complicated stories so need quite a bit of communicating and, because it was an agreed takeover, there were only one or two moments during the calendar for the deal when the pension fund could get its voice heard.

'We spent a lot of time explaining to key editors and commentators what the pension fund was after in the negotiations. It worked so well that it actually ran way with itself because the media was so well-disposed to the pension fund. It was at a time when private equity wasn't popular and the British media really got behind the pensioners' cause.'

Indeed, politicians became involved to such an extent that KKR was invited to explain itself at a House of Commons select committee hearing. The eventual settlement that the private equity house reached with the pension fund was announced on the evening before that hearing and Kiely is adamant that this was no coincidence.

'They wouldn't have done it otherwise, and the pension fund wouldn't have been in such a strong position to get such a deal if it had waited until after completion,’ he says.

'I think UK newspapers are still incredibly important. They represent different audiences and constituencies. If you're a branded business, it's really important to make sure you get the media right across the board but particularly in the mid-market, among readers of the Daily Mail, for example. Otherwise you can destroy brand value.'

Another example of the continuing power and influence of the UK press was the campaign waged by the iconic chocolate brand of Cadbury's against the hostile takeover of the company by America's Kraft Foods in 2010. While Cadbury's board eventually succumbed to an agreed offer, Alex Cole, Cadbury's global corporate affairs director at the time, believes the support the British Press gave to the company's campaign to stay independent played a major role in extracting a higher offer for shareholders from Kraft.

'The valuation at the end of the bid was £2.3 billion higher than it was at its beginning,' says Cole, now chief corporate affairs officer at health insurer BUPA. 'So, whilst they weren’t prevented from taking over the company, they were prevented from stealing it at too cheap a price.'

Cole believes that the British press can be a useful ally, if handled correctly, giving communicators skills and methods that are not always found in-house, as well as direct communication to stakeholders.

'During the bid, the papers were a key channel to speak to employees, stakeholders and shareholders,' she adds.

'This allowed us to get across messages that would have been tricky to communicate more directly. The British press has a creativity and ruthless ability to cut to the chase that can really help bring your corporate story to life. The Daily Mail, for example, publicly backed Cadbury's fight to stay independent, with thorough analysis of Kraft's track record and share price performance.’

Moreover, it also spent time and resources tracking down Flake Girls who had appeared in the company's famous adverts for this brand of chocolate, to get their (invariably negative) view on Kraft's bid.

A media outcry about Kraft's failure after the takeover to honour its pledge to keep open a Cadbury's factory in Somerset also led to a change in UK takeover rules to make statements around bids legally binding.

Kiely feels this was a landmark case for takeover communications. 'You have to ask who the major audiences are during a takeover. Clearly the most important people are shareholders and a lot of people would argue that that is all about having direct conversations with investors,’ he says.

'But shareholders are also highly cognisant of what the newspapers are saying. In terms of setting the background music, I think UK newspapers can still be incredibly important.'

Patrick Donovan, managing director of the financial public relations practice of Citigate Dewe Rogerson, agrees that Cadbury's takeover is a benchmark case for the power of the British press. 'Cadbury's is a signature deal that was badly handled by Kraft's communications people,' he says.

'They underestimated the influence of the British media. It's an absolute test case for how all elements of the media can coalesce around an iconic British name.

'If you had a takeover in the reinsurance sector or an arcane part of financial technology it might not be widely torn at by the media. But if there was a foreign bid for Rolls-Royce or even something like United Utilities, we might see the same kind of thing.'

With memories of both the Cadbury's and Alliance Boots takeovers likely to fade, a fear is that their lessons for corporate communicators may be lost. Equally, journalists and others who hark back to the golden days of Fleet Street are likely to be questioned about whether their old methods still apply in the fast-moving new era of 24-hour digital newsrooms.

However, the current round of mergers and acquisitions also provides evidence that carefully managed press campaigns can yield benefits at takeover time. When US drugs group Pfizer admitted defeat in its attempt to mount a bid for Britain's AstraZeneca in 2014, the Financial Times conceded that astute public relations work by the target company's corporate communications team and financial PR advisers Finsbury had played a part in turning the tide.

'The narrative in most news media focused from the outset on the tale of a plucky, home-grown backer of British science fighting off an American predator focused on cost-cutting and minimising its tax bill,’ the paper reported. 'Yet AstraZeneca is an Anglo-Swedish company with only 6,700 of its 70,000 workforce based in the UK. AstraZeneca also recently embarked on a plan to slash 5,600 British jobs and has shed 40 per cent of the UK workforce over the past few years.'

PR industry observers see the campaign that AstraZeneca successfully waged as creating a 'virtuous circle' of media pressure encouraging politicians to raise the matter – moves that were then applauded in the press.

James Murgatroyd, Finsbury's managing partner in London who is currently advising brewer SABMiller on its agreed takeover by AB InBev and Shell on its acquisition of oil and gas explorer BG, believes the British press can play an important role in takeovers and advises communicators to court it accordingly.

He advises communicators to gather a team and personally visit editors, correspondents, columnists and leader writers who are likely to be writing about a particular bid.

This allows companies to take the initiative in press relationships, cement existing links or create new ones and to get the message out as well as set up good communications for the relaying of potentially negative news.

'It is vital in the early days of a bid battle to bring onside as many people in the press as you can because it does influence the mood,’ he explains.

'I don't know to what extent institutional shareholders are influenced by individual articles but they do get a sense of the way the wind is blowing if the majority of the press take a particular view.'

Murgatroyd does have some sympathy for in-house communicators who say the British press only influence a relatively small part of their global audience.

However, he feels a comprehensive approach of keeping good relations with all UK Press, from the Financial Times to The Sun is still merited.

'The UK, with such a wide range of newspapers, can get a little parochial sometimes,' he adds. 'But shareholders do read The Times, The Daily Telegraph and the Daily Mail. They don't just read the Financial Times and look at their Bloomberg terminals.'

Other senior communicators warn that there are plenty of banana skins around for companies that don't take all elements of the British press seriously.

'I don't think it's like the old days,' says James Henderson, chief executive of Bell Pottinger. 'But companies definitely use financial PR agencies for bids.

'A lot of bids these days are politically-driven and are coming under increasing government scrutiny. For example, the Government is increasingly concerned about foreign takeovers of British companies.

'I would counsel against clients not keeping up relations with newspapers. It probably differs according to size because large companies are highly aware of their own image. However, they should not ignore newspapers because it’s not just about shareholders and analysts. There are all sorts of other stakeholders who are important to them in terms of building and protecting reputations.'

Henderson even wonders whether the decline of newspapers is used as an excuse by some in-house teams for avoiding Britain's tabloid press.

'There's some truth in the logic that in-house communications teams simply want to get to their investors and the papers they are likely to read,' he says. 'But where in-house communicators get uncomfortable is the Daily Mail front page-type stuff; an issue that goes beyond the business pages.

If there's a crisis, they tend to bring in consultants. 'For our client Centrica, for example, there is obviously a big political issue with British Gas and they probably utilise financial PR for help on the front end of the paper, more than they do for the back end.

'In my experience, if a company is being written about in the Daily Mail, they tend to look for external advice.'

Some commentators also question whether only bothering with a small group of major UK press is wise.

'Obviously the FT is the FT and the serious papers have more clout around boardroom tables,' adds Donovan. 'But the important point is the credibility of the journalist and whether a story is true, or if it is a comment piece, whether that comment is insightful. '

Anything that's published has a currency beyond its initial readers. It's going to go online and can be picked up by other commentators and influence other media.

'If there's a good story in the Daily Express or City AM, it's going to be picked up by the FT. That's just down to good journalism. If you as a corporate communicator are only selecting the media that you think appeal to the most prestigious audiences, you're on a hiding to nothing.'

Anthony Frost, head of communications at Santander UK, also does not agree that segregating a select band of journalists and newspapers is a viable approach. He dealt with the communications of the Spanish bank's takeovers of Alliance & Leicester and Bradford & Bingley and says his team took not only a pan-national but also a regional approach, making sure there were good relationships with the Leicester Mercury, Yorkshire Post and Bradford Telegraph & Argus local newspapers.

'It's really important to have good relationships with all of the press not only at times of takeover but at all times,' he says.

'As far as investors are concerned, you could probably focus on the Financial Times, Times and Daily Telegraph. There is some truth in that and if you are in certain sectors that are not consumer-based you could do it.

'But we are a bank and actually we have customers who read all the newspapers and their preferred reading may not be the FT.

'When we were buying Alliance & Leicester and Bradford & Bingley, there was a whole series of customers in their local areas who needed to understand who we are, what we were doing and why we were doing it.'

As for those communicators who are tempted to only deal with a handful of UK newspapers in pursuant of a global agenda, Frost has a simple message: Don't do it.

'I really believe that you have to have a broad sweep of media,' he says. 'You can't just focus on a few. If you do, I think you will get found out at times of takeover, if not before.'