Communicating in a takeover why the battle can be over before it even begins Mergers and Acqu

Wednesday, 01 December 2004


    The first 24-48 hour period is critical in terms of the success or failure of any public company takeover. It sets the tone for the entire takeover bid. The bidder has an unquestioned advantage of surprise, and a smart bidder will seek to continue that perceptual momentum throughout the contested offer period.

    Communicating in a takeover - why the battle can be over before it even begins ....

    The first 24-48 hour period is critical in terms of the success or failure of any public company takeover. It sets the tone for the entire takeover bid. The bidder has an unquestioned advantage of surprise, and a smart bidder will seek to continue that perceptual momentum throughout the contested offer period.

    To mount a successful takeover response, a company needs to be able to immediately respond to any hostile bid - in the strongest and most compelling way. The company's board and senior management team must immediately be in position to provide a clear and compelling articulation of performance and future prospects. Board or senior management indecision can paralyse a bid defence.

    The purpose of takeover bid preparation is to ensure the board and senior management are in a position to demonstrate the highest underlying value for the company's shares, so that if control is to pass, transfer occurs on acceptable terms.

    The continuing independence of the company may result from a successful takeover defence, but that is not the objective. Getting clarity on this point among a board and senior management team up front (and hopefully before any bid emerges) can sometimes be a key to a successful takeover defence. Many boards have grappled with this dilemma in public takeover situations (the "defend at all costs" mode). Clarity of intent needs to be agreed before a bid emerges.

    In summary, preparing for a takeover requires a single-minded focus on value. Bid preparation reduces the offeror's advantage of surprise and increases the company's ability to demonstrate optimal value of the company. It also assists in controlling perceptual momentum from the company's viewpoint and its value proposition among investors/opinion influencers. A company is more likely to retain the support and confidence of shareholders if it is perceived to be acting in their best interests.

    The following strategies help to create value during a takeover

    Preparing for a bid

    Implementing a successful takeover defence involves careful preparation including:

    • Creation of a defence team structure to manage the bid response. The team should include the chairman, response team and stakeholder communications team. Each of these key decision making groups must have clearly defined roles, responsibilities and actions. As a takeover situation can be very time intensive, this structure lessens the risk that the attention of the board and senior management team will be diverted away from running the company.
    • Establishment of communications protocols to retain control of the company's messages. This includes the identification of authorised spokespersons and development of a media contact protocol.
    • Development of security and logistics procedures so that a response and communications room can be fully operational at short notice.
    • Anticipating a range of bidders and different bid scenarios so that tailored responses can be prepared in advance of each scenario.

    It is critical to react with speed and decisiveness after being notified of a bid. Thorough preparation ensures that a company is able to respond immediately to various bid scenarios and can communicate quickly to key stakeholders. A rapid communication response ensures that a company's point of view is well represented in early media coverage, and gives a company an important competitive advantage in the early stages of a hostile bid. Dominating perceptual momentum from "day one" is critical in supporting defence strategies.

    An integrated communications strategy should be developed so that a company can quickly communicate its key messages through the media, Internet, face-to- face, advertisements, telephone call centers and analyst research. This includes preparing external and internal communications materials such as announcements, scripts, Q&A and e-mails. Letters to shareholders should be prepared in the planning phase.

    Build recognition and opinion before any takeover

    Effective bid defence takes place well before any bid emerges. You cannot make friends in a crisis. Understanding of a company's "investable" brand must be built well ahead of time. A company needs to instill confidence and credibility among investors/opinion influencers so that in the event of a crisis situation like a takeover - key stakeholders already understand the company's strategies, competitive position, management strength and growth potential.

    The first step in building informed opinion is getting the value message right. The company's 'positives' should be distilled into three or four core value messages that can be adapted for each stakeholder group. Key audiences such as investors, analysts, media and employees must have a clear understanding of a company's core value proposition for a takeover defence to be successful.

    Peter Hunt, managing director of specialist investment bank Caliburn, sums this up: "It's important that a company is getting its 'value proposition' message out to the market on an ongoing basis - and not waiting until the half year or full year results. Institutional investors are highly astute professionals who will be skeptical if there is rash of publicity on the company's competitive position or earnings outlook immediately following the announcement of takeover."

    Part of the message development process also involves anticipating potential negative issues that could emerge during a hostile bid situation. A response strategy for each scenario must be developed so that the company can respond deliberately and decisively - and prevent losing perceptual momentum.

    A common error some companies make is not paying enough attention to the actual delivery of messages. Institutional investor presentations and media materials should be of very high quality and sharpened to ensure that the structure and message are aligned with the value proposition.

    Company spokespeople must undertake presentation and media skills training so that messages can be articulated clearly and effectively. It is critical that a spokesperson is able to retain control of interviews and presentations - particularly when faced with a barrage of negative questions or criticism. Preparation for direct communication with institutional investors is essential, as the spokesperson needs to be able to anticipate institutional issues and smoothly handle investor concerns and questions.

    Hunt has this perspective on the role of spokespeople: "The company's spokesperson must be a senior decision maker - either the CEO or chairman. It is important that senior people don't taint messages with concern about their own position as opposed to representing the best interests of the shareholders. They must also delegate their workload to allow enough time in their schedule to be available to speak when required."

    The second stage of a building informed opinion involves building relationships with key "value influencers". Relationships are built through an integrated campaign of meetings, briefings and site visits for analysts, investors and the media. This "face" time is crucial in developing trust and opening the lines of communication.

    Finally, the company should target opportunities like public announcements to build its profile and reinforce its core value propositions through the media. Media opportunities can be exploited through journalist briefings, one-to-one interviews and background briefings with commentators. The company should leverage any opportunities such as milestone events (e.g. project developments and financial results) to raise its profile.


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