For all major corporate M&As, there are two PR teams behind the scenes.
Mergers and acquisitions produce not only headlines in the business section, excited shareholders, and lots of talk of "synergy," but also a host of challenges for communications pros. Every deal is its own beast. Shepherding them to completion might be one of the toughest tasks a PR person can undertake.
For in-house corporate communications teams, the challenge can be twice as daunting. When a merger is in the works, they must reach out to an entirely new group of stakeholders with new and targeted messages while dealing with a grain of uncertainty about their own personal futures - all, of course, on top of their normal workload.
Some M&As are relatively businesslike and smooth. Those are the friendly deals. Then there are the questionable, aggressive, or downright hostile ones. Those can be the test of a lifetime.
The Oracle-PeopleSoft story
One of the largest and most high-profile hostile deals in recent history was Oracle's bid to take over PeopleSoft, an important but smaller software rival. The battle for control of PeopleSoft, which began in summer 2003 and dragged on until earlier this year, is a case study that highlights the extent to which an acquisition can envelop corporate communications on both sides of the deal.
Kara Wilson, former VP of corporate communications for PeopleSoft, was asleep in an Arizona hotel room in June 2003 when a 4:40am phone call woke her up. The call brought the news that Oracle had launched its takeover bid for the company. Seven minutes later, she was on a conference call with senior management to discuss their next move.
Wilson immediately grasped the significance of the threat to PeopleSoft. Within the hour, she had contacted both the company's AOR, Porter Novelli, and hired M&A and crisis specialist firm Joele Frank, Wilkinson Brimmer Katcher. "There's a lot to know during the first few hours and days from a communications perspective," Wilson says.
Neither she nor anyone else on her communications team was particularly happy about the timing of Oracle's bid. In fact, Wilson was looking forward to a vacation; only four days earlier, PeopleSoft had announced the acquisition of software company JD Edwards. For that deal, she had just completed lengthy communication programs targeting customers, the public, industry analysts, and employees, and now she was facing the same task all over again.
"Acquisitions in general present fantastic communications challenges," Wilson says. "Employees are concerned they will lose their jobs, customers are concerned they will lose support or focus, industry analysts are concerned about the integration of the two product lines, and the press just wants the titillating information - the drama of what went down and how it happened."
As PeopleSoft pursued its strategy - designating a spokesperson, conferring with its agency, and making sure its entire PR team stayed on message - Oracle was working just as hard to position itself as a benefactor for PeopleSoft's shareholders. One source close to the deal said that Oracle's communication team was involved in every step of the 19-month process, which culminated in the acquisition of PeopleSoft, from wooing the stock market to touting the company's cause in the media.
Oracle acquired PeopleSoft after a long, heated, and very public battle. When the time came to merge the two companies, the corporate communications teams faced a sticky situation. Although both understood that the acquisition was a business, not a personal affair, those who had been out front in delivering the back-and-forth messages still had some natural lingering feelings of resentment. The source close to the deal says that planning for the integration began nonstop as soon as the deal was finished, and there was pressure to keep the communications team of the combined company about the same size as Oracle's existing team.
Because of that, the source says, and because many on the PeopleSoft side did not want to work for Oracle after the skirmish of the acquisition, only two of PeopleSoft's 12 PR pros joined the combined entity. Wilson confirmed this in a PRWeek news story at the time of the merger. Oracle's communications head, Jim Finn, left the company after the merger announcement. He was replaced by Jeff Lettes, who left last month. Bob Wynne, new VP of worldwide corporate communications, wasn't available for comment by press time.
Wilson, who also did not stay on after the acquisition, says her team initially was more concerned about retaining jobs after the JD Edwards deal, and was not yet worried about Oracle. But after Oracle acquired the firm, she began a thorough review of her department for the benefit of Oracle, including detailed briefings on every member of her team and disclosure of the company's communication strategy, much of which was geared toward defeating Oracle's bid. She compliments Oracle for its professionalism in managing the integration, but acknowledges that the transition from battle mode to partnership was "extremely difficult."
The importance of teamwork
The Oracle-PeopleSoft deal is a stark example of how vital successful strategic communications are for the PR pros themselves. Most companies involved in major M&As, whether friendly or hostile, also bring in outside specialists to advise them on the nuances of the process. Joele Frank, whose involvement in the PeopleSoft deal was but one episode on her lengthy resume, says that she works "incredibly closely" with in-house communications teams on any deal. (Indeed, Wilson says she was on the phone with Frank 15 times per day.)
"What we're doing has different relationships and skills," says Frank. "We work with them to ensure that they're able to apply what is best from their perspective, and we can help them from the outside perspective. We want to make sure that everyone gets an 'A' in 'deal.'"
She characterizes her work as "backdoor PR," including behind-the-scenes work, such as CEO media training, that tends to go over more smoothly with an outsider than with an inside subordinate. Frank says her work, which can evolve from a matter of days into a long-term commitment, rarely involves advising on the integration of in-house communication teams at the merged company. But she says that her firm can be a source for headhunters looking for new talent to connect with recently laid-off PR pros who were casualties of consolidation.
Steve Frankel, the head of Financial Dynamics' M&A practice, notes that in-house corporate communicators at big companies are usually relatively sophisticated in their own right when it comes to M&A communications. But specialist firms bring unique skills to the table, he says, including relationships with bankers, law firms, analysts, and M&A media outlets, that most corporate pros have not had the opportunity to acquire.
The deal market has remained hot this year, and bigger, more frequent deals mean in-house teams are more likely to encounter an M&A situation at some point. By focusing on the good of the company, planning ahead for the integration of different corporate cultures, and drawing on the expertise of M&A specialists, PR pros can increase their chances of surviving a merger and thriving in the combined company.
"Now that M&A is coming back in a big way, you're seeing the deals announced in a much more strategic and professional way," Frankel points out.
The agency perspective
Although many PR firms that serve as AORs for corporations are relegated to a sideline role while the specialist machinations of an M&A play out, their minds never stray far from the question of whether or not they will be kept by the combined company. The acquiring entity will often keep its own AOR, while the acquired or smaller company will drop its firm. That decision is generally made after a review (either actual or simply as a formality), which is undertaken as part of the process of corporate integration directly after a merger is agreed upon.
The particulars of the agency consolidation depend on how each company has used PR in its past incarnation. For those that concentrated their corporate communications in-house, dealing with agencies might be far less important than integrating the corporate teams. In the recent multibillion-dollar Sears-Kmart deal, for instance, neither company had an AOR at the time of the deal, and the new company has not hired one thus far.
The Oracle-PeopleSoft deal, though, was no exception to the rule. After the two joined, Porter Novelli was dropped as PeopleSoft's AOR. (Oracle works with Zeno Group.) PeopleSoft's former VP of corporate communications, Kara Wilson, says that was "a shame" because of PN's expertise with PeopleSoft's products and how it complemented work on the product side even throughout the takeover battle.
But firms can take heart in the case of the high-powered US law firm Kirkpatrick & Lockhart Nicholson Graham, which merged early this year with another large firm in London. Clara Boza, the agency's CMO, says that the firm actually added a PR agency after the merger, bringing in Myddleton Communications to assist its London office with the messaging and rebranding process that went along with the deal, separate from the US side of the firm's work with legal specialist Elizabeth Lampert PR. Every week, personnel from the two agencies talk with Boza and her UK counterpart to coordinate strategy internationally - a big happy family of agency cooperation.