The Importance of Communicating in the Event of a Hostile Takeover
Business acquisitions, buyouts, and even hostile takeovers are an everyday reality in the business market. It’s how larger companies turn competing brands into allies and bring them into the fold, and how owners of small startups can cash out to focus on other ventures.
However, with all the politics and harsh disagreements behind hostile takeovers, brands get shaken up and do not always recover. As shareholders remain the backbone, at least financially, of most corporations, management must communicate clearly before, during, and after the transaction takes place.
This is true even when management changes during the process. They should also make an attempt to communicate with other human and financial assets to the company, such as customers, partners, the public at large, and the media.
In Case it Fails
Not all hostile takeovers go through. Sometimes a crisis in the paying company forces them to regroup and redistribute their focus and resources elsewhere. Sometimes management and the owners successfully block the process from reaching completion.
Yet, the second news reaches shareholders, employees, and the media of even a potential takeover, people get antsy about what new changes may come about, and what it could mean for them. Key personnel could resign, partners could pull back, and customers may begin to consider other alternatives.
As a result, managers should communicate clearly to ensure that should they win the battle to keep the company, the stress of the takeover does not leave them with a shaken and broken brand with little value.
Shareholders and employees alike usually distrust the new owners after a hostile acquisition. They may also blame the old owners for giving into the demands in hopes of getting a quick buck.
Employee loyalty may dissipate as some jump ship, or leak details of the transaction to the press. Low morale may also lead to low productivity and passive aggressive sabotage efforts against the company. Effective communication can help fix this distrust.
Employees and shareholders are not the only ones who consider jumping ship. Customers and clients often need reassuring as well through clear and frequent communication.
For instance, when Facebook bought WhatsApp, many users expressed malcontent with the decision and joked that the second Facebook took over the app, it crashed – which, in all honesty, it did.
Many people speculated that Zuckerberg only bought WhatsApp to shut it down, and force the users to chat via Facebook messenger instead. It was not the case, but the outrage and suspicion caused users to turn to other platforms like Line, KiK, Viber, and even BBM.
Brand Management for the Paying Company
No one likes a bully, and the media will paint the buying company in a hostile takeover as exactly that. This can affect public opinion of the company for the worst, and inspire media publications to dig through the company’s past to see what other unkind deeds it has been party to.
By communicating with not just shareholders, employees, and customers, but also the media, companies may spare the brand from dangerous speculations.
A hostile takeover comes with setbacks and risks for both sides of the transaction. But new and old owners alike can reduce the suspicion people may have about their agenda and new changes that may take place, by keeping the human and financial resources behind the brand informed.
Chris Burch is a venture capitalist and founder of Burch Creative Capital.