The most common measurement of a successful M&A deal is a well-funded financial transaction. However, the financial details of a merger or acquisition don’t even come close to the best indicator of a successful deal.
Beyond negotiations and due diligence, and all the other financial details, we find that the true success of a deal depends on the employees and the smoothness of integration.
Clear messaging, determining an appropriate level of transparency, and communicating with the intent to relieve anxiety and avoid negative perceptions or reactions are critical concerns that should be given equal consideration with the financial aspects of a deal. These concerns are complex and require extensive planning and alignment between both the buyer and the seller well before the transaction is closed. However, firms often lack a well-thought-out strategic plan for how they expect to retain their most important asset, their people, during integration.
One of the best ways to check these people-centric boxes is to develop a clear internal communications plan.
Lead with People
Even though confidentiality is crucial while negotiating the sale or purchase of an AE firm, it must be balanced against the potential loss of key employees if they are negatively surprised by the news. Having an open and inclusive culture with active communication channels is a significant advantage here, and part of that is having an accurate read on how your employees feel.
Generally speaking, a “command and control” management style is terrible on many levels, but in M&A, it can completely stop a deal. In many firms, informal leaders often have a better sense of employee attitudes than the owners do. The buyer and seller can leverage this valuable insight to make the communications process as positive and effective as possible. Early in the process, buyers and sellers should identify informal leaders and plan to bring them into the information loop as soon as appropriate. Their contributions can help develop an internal communications plan that speaks to employees in a relatable and personal way.
Often, the fear of the unknown is far worse than the reality of working in a new firm. The AE industry is full of M&A horror stories, so you can expect employees, even key employees, to be anxious and perhaps upset at the change. Trust plays an essential role in alleviating those feelings, but money can also be a helpful tool. Setting aside a portion of the deal value as retention bonuses for those key employees who are not owners lets them know that they are valued and considered part of the new firm’s future.
Communicate for Success
A successful integration plan hinges on how well your firm management communicates with employees and how fast you resolve employee uncertainties about the deal. Here are some best practices to tackle potential upheavals often associated with a transaction:
Timing is Everything
Create a clear announcement plan for both during the deal and before signing. Ideally, the first time your employees hear the news should not be post-deal. Surprising your employees will make them feel like they are being ambushed and can immediately create mistrust of the situation.
Buyer & Seller Alignment
The information that will be communicated should be formed as an agreement between the buyer and the seller. It is extremely important to speak with one voice when giving information to employees. The consequences of either party being misaligned can be devastating.
A Clear “Why”
Make sure the deal’s announcement provides your people with an understanding of why the deal is happening in the first place. Sharing some history about how you arrived at this decision can reduce uncertainties. Creating and sharing a road map for the years to come is a huge part of the “why.”
What’s in it for Them Personally
During your communications, make sure people understand what the deal means for them on a personal level. Employees want to know that this change will positively impact their lives. Remember, your employees have lives outside of work, and this announcement will raise questions and concerns for the employee and those close to them. Providing the employees with information that helps them fully understand the personal impact can diminish concerns and promote optimism.
A well-thought-out communication plan is essential to a successful transaction; without it, your risk of M&A-related turnover increases significantly. Join us for our upcoming webinar, M&A: A People-Centric Approach, to learn from our experts how to go beyond the financials to preserve your human capital.
Brad Wilson, CMA, CDA, MBA | Director, AE Consulting
Brad’s 30+ year career spent working with architecture and engineering (AE) firms includes his most recent role as Partner with TWO CPAs & Consultants, Inc., as well as being a Consultant with PSMJ Resources for 17 years. Additionally, after serving as an outsourced CFO and controller for numerous firms, Brad has deep firsthand knowledge of how to develop and execute successful finance and accounting practices in the AE industry.