Mergers & Acquisitions
HIGH STAKES
THIS ISSUE: MERGERS AND ACQUISITIONS
Last week’s news that Qwest Communications and CenturyTel are planning a merger that would represent one of the most significant telecom deals in almost a decade has provided the most concrete evidence to date that an expected uptick in M&A activity may finally be upon us. But in the wake of the recession, companies ready to consolidate their businesses must also be prepared to sell the deal to stakeholders who are as skeptical as ever.
In this issue we outline strategies to promote mergers and acquisitions to all parties…Gain insight from Jonathan Orloff, former professional staffer to the Senate Judiciary Subcommittee on Antitrust and Monopolies…Take a look at the blogs covering M&A activity…And talk about digital and social media will continue to impact due diligence.
Strategies: Defining the deal as a win-win-win
It’s crucial to articulate the bottom-line advantages of a merger or acquisition to shareholders on both sides of the deal – but more than is needed. In an era of economic uncertainty, companies must also communicate consumer benefit, reach out to the employees and local communities that will be impacted, and demonstrate value to the legislators and regulators whose focus on M&A activity will intensify.
It’s a significant undertaking to be sure. But in an environment where the negative perceptions of one stakeholder group can set off a chain reaction that reduces support across the board, engaging each of these vital audiences is essential to success.
Articulate shareholder value. The need to win shareholder support on both sides of the deal is obvious. But too often, shareholder communications about a merger or acquisition diminish once the deal is done. In an environment where investors in the acquiring company will sue claiming the price was too high, and investors in the acquired company will sue claiming the price was too low, continuing to communicate fairness and value long after the ink deters litigation.
Don’t Forget the Consumers. Back in February, the U.S. Department of Transportation (DOT) announced that it would allow American Airlines and British Airways to “more closely coordinate international operations.” In so doing, it underscored the correlation between Main Street opinion and Beltway deliberation. The DOT’s comments confirm that the driving criterion for antitrust approval remains what is best for the American people in terms of pricing and availability of goods and services. “[We] tentatively found that granting antitrust immunity…would provide travelers and shippers with a variety of benefits, including lower fares on more routes, increased services, better schedules, and reduced travel and connection times,” the DOT said.
Engage local communities. As Jonathan Orloff reminds us in the interview below, the unions, local politicians, and local chambers of commerce that will be significantly impacted by a deal can be staunch allies or bitter enemies. These are the audiences Congress listens to when deciding to offer support or stand in opposition. To the extent possible, keep them happy.
Control the rumor mill. Rumors spread like wildfire during transactions impacting internal and external audiences alike. Companies involved need to monitor traditional and digital media mentions so that gossip, innuendo, and misinformation can be addressed in real time in order to achieve the main goal of getting the deal done quickly.
Industry insight: Jonathan Orloff, President of Capitol Partners, Inc.
Jonathan Orloff is the President of Capitol Partners, Inc. and an expert guide to Washington’s murky political waters. As a key aide to former Massachusetts Senator Edward Kennedy, he served on the U.S. Senate Judiciary Subcommittee on Antitrust and Monopolies and the full Senate Judiciary Committee. A public affairs specialist who was deeply involved in the congressional oversight of some of the highest profile M&A battles of the 1970’s and ‘80s, Mr. Orloff shared his insights on the public sector dimensions of M&A communications with High Stakes™:
In your experience, what factors drive regulatory or legislative bodies to oppose a merger or acquisition? Is it all about consumer costs and benefits, or do other elements of the deal play a role as well?
Jonathan Orloff: From a public policy perspective, members of Congress, and particularly those who sit on the committees of jurisdiction, become very concerned when a combination of two companies is likely to substantially reduce employment. So if the motivation behind a merger is to produce the same goods or services for less money – as is often the case – and one of the ways to achieve that reduction in cost is a reduction in workforce, politicians who represent the districts that are going to be negatively impacted are likely to oppose the deal.
Those anxieties can, in some cases, be balanced by projections of lower costs to consumers. But when you’ve got a projected benefit in one column and a definite loss in the other, it’s unrealistic to expect a Senator or Congressman who will have to explain massive job losses for his or her constituency to get behind the deal. It’s a question of what’s tangible and what isn’t – and what’s tangible is usually going to win out.
Conversely, are there ways to transform legislators or regulators into champions of a merger or acquisition? If so, what are the most effective means of doing so?
Jonathan Orloff: Yes, but it requires a very careful, deliberate and open discussion with members and their staff about the benefits of a particular transaction.
On the flip side of that coin, you’ve got to remember that we’re living in an age when just about any major business issue can be politicized at the drop of a hat. So to proceed with a transaction without informing the key players on Capitol Hill of what’s to be gained from the deal is to take a significant and unnecessary risk.
What are the other audiences (both internal and external) that must be effectively engaged to win government approval of a merger or acquisition? To whom does the government listen on such matters and what messages do they need to hear?
Jonathan Orloff: Companies involved in a merger or acquisition need to focus on the communities that will be most impacted, just like members of Congress will. Are plants going to close? Are small towns that depend upon one major employer for survival going to go under? These are the questions that Congress will be asking, and they’ll go straight to the source for answers.
That means engaging unions, local chambers of commerce, local legislators, and the community at large as early in the process as confidentiality concerns will allow. If the net benefits will outweigh any losses, there’s no reason a company can’t enlist these key constituencies as supporters of the deal and send a powerful message to Washington.
What’s next on the M&A landscape? Are there issues emerging on the horizon that tomorrow’s deal-makers need to be aware of?
Jonathan Orloff: At a point in time where merger activity seems to be on the rise and we’re still in the nascent stages of economic recovery, we’re likely going to see government taking a much more hands-on approach to M&A issues than we’ve grown accustomed to over much of the last decade. In a fragile environment with historic levels of unemployment, a merger presentation before Congress or the DOJ that is unprepared or – even worse – non-existent is going to raise unnecessary concerns and unnecessary obstacles to achieving merger approval.
Blogs and M&A
For the latest information on the rumors, regulatory actions, judicial decisions, and marketplace developments that impact deals and dealmakers, the blogosphere is an indispensable resource. With today’s posts increasingly shaping tomorrow’s headlines, it is essential to keep with the online narrative that ultimately makes or breaks a transaction.
Here’s a look at five significant blogs:
M&A Law Prof Blog
http://lawprofessors.typepad.com/mergers/
As part of the elite Law Professor Blogs Network, M&A Law Prof Blog reports and analyzes the most up-to-date legal issues impacting the M&A landscape.
As part of the elite Law Professor Blogs Network, M&A Law Prof Blog reports and analyzes the most up-to-date legal issues impacting the M&A landscape.
New York Times' DealBook
http://dealbook.blogs.nytimes.com/
Edited by Andrew Ross Sorkin, the New York Times’ DealBook covers mergers, acquisitions, venture capital, and hedge fund issues, with a focus on breaking news, regulatory actions, and legal proceedings.
Edited by Andrew Ross Sorkin, the New York Times’ DealBook covers mergers, acquisitions, venture capital, and hedge fund issues, with a focus on breaking news, regulatory actions, and legal proceedings.
Wall Street Journal's Deal Journal
http://blogs.wsj.com/deals/
Wall Street Journal’s Deal Journal blog is a must-read for those seeking an “up-to-the minute take on deals and deal-makers.”
http://blogs.wsj.com/deals/
Wall Street Journal’s Deal Journal blog is a must-read for those seeking an “up-to-the minute take on deals and deal-makers.”
Dealbreaker
http://dealbreaker.com/
Self-dubbed as a “Wall Street tabloid,” Dealbreaker is the go-to source for the latest commentary on rumored deals and government approval processes.
http://dealbreaker.com/
Self-dubbed as a “Wall Street tabloid,” Dealbreaker is the go-to source for the latest commentary on rumored deals and government approval processes.
Reuters' DealZone
http://blogs.reuters.com/reuters-dealzone/
Reuters’ DealZone blog, dedicated to M&A news and events, is an unparalleled source for an exclusive, behind-the-scenes look at today’s deals and deal-makers.
Reuters’ DealZone blog, dedicated to M&A news and events, is an unparalleled source for an exclusive, behind-the-scenes look at today’s deals and deal-makers.
What's Next? Digital Due Diligence
From the media and entertainment sector to the high-tech industry and the alternative energy market, companies now emerging from the cash-strapped markets of 2008 and 2009 are looking to make moves. But before the wheeling and dealing begins in earnest, companies seeking to make major acquisitions in 2010 need to be aware of how digital and social media monitoring can keep the reputational liabilities of current or potential business partners from becoming their own.
In an interconnected global economy, companies are judged in part by the company they keep. When conducting major transactions, entering emerging markets, or initiating partnerships with vendors, suppliers, or distributors, it is no longer sufficient to simply vet a potential partner’s fiscal health, legal liabilities, or regulatory environment. Their standing in the Court of Public Opinion is an essential element of due diligence as well. A business partnership is tantamount to an endorsement of the partner’s business practices and the social and political messages those practices communicate.
The reputational implications of a potential business relationship cannot usually be found on a balance sheet or earnings report. More often, they are hiding in plain sight on nightly newscasts, front page headlines, or any of the 133 million active blogs throughout the world. Traditional and digital media sweeps for mentions of the company – and its leaders – are essential to risk assessment and due diligence.
Digital media sweeps, encompassing online-only publications, blogs, and other forms of social media, have taken on added significance as the Internet increasingly drives traditional media coverage. With more than three-quarters of traditional journalists reporting that they regularly check blogs for story ideas, the digital space provides the most comprehensive real-time snapshot of a potential partner’s reputational liabilities.
In the Information Age, digital media monitoring enables companies to make the most informed decisions possible as to where, when, and with whom to conduct business
This month's top posts on Levick's...
Michael W. Robinson examined the strategies that Goldman Sachs executives could have employed to dim the harsh spotlight that accompanies congressional and SEC scrutiny.
Gene Grabowski discusses how industry can best respond to the recent oil rig explosion off the coast of Louisiana.
With reports surfacing that as much as half the humanitarian assistance provided to nations in crisis is diverted from those that deserve it, Richard Levick outlines the ways effective communication can serve as a powerful deterrent to corruption.
Michael W. Robinson writes about the growing role of YouTube in corporate communications, highlighted most recently by Warren Buffett’s cameo in a viral video produced by Geico.
In this installment of Bulletproof’s most popular weekly series, Patrick Kerley outlines tips for sifting through the 133 million regularly-updated blogs to keep up with the most relevant commentary on your company or industry.
Making Your Point
Making Your Point, a new book by Levick Senior Vice President David Bartlett, examines the fundamental strategic considerations driving effective communication. It defines that key component called “emotional intelligence.” It provides the simple powerful tools to make a point in person, prepare and deliver effective speeches and presentations, get messages across in a media interview, and communicate during crises. Making Your Point is an easy-to-use communications guide for professionals and non-professionals alike. Order your copy today.
Making Your Point, a new book by Levick Senior Vice President David Bartlett, examines the fundamental strategic considerations driving effective communication. It defines that key component called “emotional intelligence.” It provides the simple powerful tools to make a point in person, prepare and deliver effective speeches and presentations, get messages across in a media interview, and communicate during crises. Making Your Point is an easy-to-use communications guide for professionals and non-professionals alike. Order your copy today.
Stop the Presses: The Crisis and Litigation PR Desk Reference – now in its second edition – is a survival manual for corporate leaders, board members, lawyers, and communications specialists. This book provides the dos and don’ts of crisis planning and communications and articulates the essential strategic guidelines for navigating myriad bet-the-company issues. Order your copy today.Future High Stakes™ issues:
Maximizing Social Media's Potential:
Blogs, Facebook, and Twitter are shaping buying decisions like never before. Do you know the rules of social media engagement?
Patents & IP Litigation:
High-profile intellectual property cases threaten to sink stock prices. How can companies protect themselves in the wake of a negative ruling?
High-profile intellectual property cases threaten to sink stock prices. How can companies protect themselves in the wake of a negative ruling?
CEO Departures:
Whether in the midst of crisis or at the end of a long and successful run, CEO departures present critical communications challenges. Do you know how they are best overcome?
More to come:
- Coming to America
- Diversity
- Education
- Executives Behind Bars
- Food
- Global Capital Markets
- Intellectual Property
- Internal Communications
- Internal Investigations
- Monetizing Moments
- Money Laundering/Money Transfers
- New Media/Social Networking
- Product Liability
- Professional Services Crises
- Public Equity
- Whistleblowers
- Reputation Management – Celebrity
- Reputation Management – Corruption
- Reputation Management – SEC Investigations
- Tourism
- Trade
Next month in High Stakes™: ANTI-CORRUPTION
With corruption investigations and enforcement intensifying around the world, High Stakes™ examines the connection between communications and compliance.