ANALYSIS <b>The Agency Business</b>: Planning vital to working for both sides in a friendly merger

Representing both sides in a merger or acquisition will not necessarily bring up ethical issues or conflicts of interest for a PR agency if it takes the proper precautions.

Representing both sides in a merger or acquisition will not necessarily bring up ethical issues or conflicts of interest for a PR agency if it takes the proper precautions.

You could chalk it up to the summer news doldrums. Or perhaps it was just a snarky London hack eager to give some back to a prominent PR firm. In any case, when City Spy, a business column in the Evening Standard, noticed that the Brunswick Group was repping both companies in what would be the largest cross-border transaction in Europe, the anonymous author summed up the arrangement in a way only a Brit could: "Most odd." It turns out, however, that Brunswick's work for both companies in Banco Santander Central Hispano's proposed acquisition of Abbey National is anything but odd, according to those in the small group of firms that handle major mergers and acquisitions. To a casual observer, it might seem that doing double duty would be rife with potential for conflicts of interest. Insiders, however, pretty much agree that a deal where both sides have the same objectives doesn't provide any ethical issues for the PR firm, provided it meets basic requirements, such as letting both clients know what's going on. "It's got to be done sensibly and with full disclosure," says Mike Buckley, a partner in Brunswick's US office. "The biggest challenge of any communications assignment is coordination of all the parties involved. And in one as complicated as a merger, it can be extremely beneficial." While not especially common, these situations are not exactly rare either. Brunswick, for instance, represented both sides in the Glaxo Wellcome and SmithKline Beecham merger, in the AstraZeneca merger, and in the union of Celltech-UCB, the UK and Belgium's biggest biotechs. Other firms have found themselves in similar situations. Burson-Marsteller, for instance, worked for both Roche and Genentech in their 1990 merger. Michael Claes, MD of Burson's corporate practice, says there are many situations in which this is a comfortable arrangement. He adds, however, that there's often more than what meets the eye in an apparently friendly deal. "There are very few truly friendly deals," he says. "Under the surface of most friendly deals is a tension between both companies because somebody is perceived, correctly or not, as a winner and somebody as a target. That sets up a lot of emotional tensions inside the company." That's why, in addition to pre-bid due diligence that will sniff out whether things are likely to turn hostile, it's important to have an early-warning system in place. It's also important to maintain two teams that are discrete but also able to work out differences in messaging and other matters. Claes says, "The two teams that counsel either side give their fair, objective advice, and when there are issues or conflicts that need to be resolved - one side wants to say 'X' and the other side wants to say 'Y' - then in a very controlled way the leadership of both teams come together and figure out how to resolve it." Almost regardless of whether these precautions are taken, this kind of scenario raises the possibility of sniping from the media. Witness the flak the law firm Wachtell, Lipton, Rosen & Katz took in the late 1990s, when it seemed that its star banking attorney, Edward Herlihy, was involved in every major deal, including mergers where his firm worked on both sides. Even in the boom times, when the corporate-governance crisis was just a glint in some government regulator's eye, The Wall Street Journal saw fit to call attention to the firm's apparent omnipresence. Yvette Kantrow, executive editor for The Deal, is surprised that anyone would even try it in the current climate. She admits, however, that much of the press attention to such matter is less than substantive. "I'd think people would be less likely to take that chance," she says. "The reaction back when Wachtell was doing it was enough to scare people off," Kantrow adds. "I can't imagine it today when you have Eliot Spitzer looking for anything that remotely resembles a conflict." Looming over the issue is the fact that in PR, there are few companies that do this kind of highly specialized financial work and do it well. The M&A PR world is dominated by just a few firms, which have developed a stranglehold on the business through entrenched relationships with lawyers and bankers. Because of this, it may just be easier for corporates to stick to who they know, hire just one firm, and let the media say what it will. Perhaps Kantrow sums it up best. "It's such a clubby world." Representing both companies Issues in working both sides of a friendly transaction:
  • Due diligence. The agency should make sure that the bid won't turn hostile or that a third party won't break onto the scene
  • Full disclosure. The agency should tell each client it's working with the other
  • Exit strategy. The agency should develop a plan in case the buyer's and target's interests are no longer aligned

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