So last time we were looking at a target company that was in the middle of announcing to its staff that it had agreed to be sold (All Quiet on the Working Front). The Merger Verger was lucky enough to have “fly on the wall” privileges for two conference calls that were part of the internal announcement process. We continue our previous commentary with one more Simple observation.
The second call was focused on the target’s sales team, giving insight into the acquirer and food for dealing with potential customer concerns about the transfer of ownership. Again, all mostly Acquisition Integration 101 stuff. But as the call neared its end, one of the participants asked, “what are we not supposed to tell our customers?”
OMG … what a fantastic question!! And all too often overlooked (as it was in this case).
It’s not The Merger Verger’s intention to list the million and one possible issues for non-disclosure (or even just one, for that matter), but we do point out that guiding staff – particularly those who are to be ambassadors of change to such outside stakeholders as customers or suppliers – about what they should not discuss is just as important as guiding them on what they should say. A simple “that information is not being disclosed [for competitive reasons, or whatever]” is usually enough to do the trick without sounding evasive or unhelpful. If, for some reason, that is not enough for the stakeholder, make sure your team knows what it is permitted to say and – also important – where the concerned party can go either for more help or for a more senior (and therefore presumably more satisfactory) explanation of the non-disclosure.
So when you are developing your core FAQs to prepare insiders for their conversations with outsiders, make sure you pause to include potential questions that they should not be answering and what they should be saying or doing instead.
Simple enough. But don’t be so focused on perfecting your outgoing messages that you overlook it.
About the Art: It’s all 1940s. Top: a US Navy propaganda cartoon by artist/satirist Robert Osborn encouraging civilians to keep their mouths shut. Middle: a British equivalent by artist Gerald Lacoste (1942). Bottom: the very definition of “better to say nothing.” Harry S. Truman holds up the morning edition of the Chicago Daily Tribune announcing – erroneously – that he had been beaten by Thomas Dewey in the race for president. November 3, 1948.
The process of rolling up acquisitions in a fragmented industry is pretty standard stuff these days. But it’s still worth looking at the topic because there are so many variables within the “sameness” of fragmentation that can go wrong.
One of the major potholes you can hit in rolling up smaller acquisitions is sourcing. No, not your own sourcing; your customers sourcing you! And if you don’t pay attention to that issue, your robust roll-up can get flattened.
Here’s the scenario: Say you’re a private equity investor looking to launch a consolidation play. You make an investment in a fragmented industry, with the seed acquisition that has all the right attributes including a cornerstone customer, say, a Honeywell or a GE with locations and opportunities all over the map. Your aspiration is to consolidate the industry and grow that customer into an enormous national account. Good concept.
Customers that source products or services from a highly fragmented industry have built up buying practices to mirror the availability of supply. All of their sourcing processes and sourcing infrastructure are based on purchasing from myriad local vendors.
So if your investment thesis is predicated on reshaping the long-standing business practices of a customer, The Merger Verger predicts that you will be in for some rough going.
It is one thing to do a deal and change the culture of the acquired organization; you own it. But changing a customer’s culture is quite another thing. So we strongly recommend that you not base your deal economics on changing any deeply entrenched buying patterns of your customers, however brilliant you think your new offering might be. You could be betting the farm on someone else’s willingness to change. Never a good strategy.
Deal Rollatini in the Works
If the title of this posting inadvertently led you here in search of Italian food, The Merger Verger appreciates your reading all the way to the end. Your reward is here: Veal Rollatini with Marsala Sauce. (Our only suggestion might be to add some fresh ricotta to the mix.) Let us know what you think.
A previous posting looked at the issues that can arise when acquiring a company with a long-time owner/founder or (even worse) an owner given to self-love … what the shrinks call a “narcissist.” Today is follow-up: some cautionary approaches to dealing with them because (ah, life) they are way too prevalent to ignore.
Long-time owners can bubble with positive pride about their companies but their management techniques can make it extremely hard to tweeze apart what they themselves have accomplished versus what the company has accomplished. Particularly if the seller/owner is retiring to Madagascar, this lack of clarity can become a big issue.
And narcissists can be enormously charming individuals. That can make spotting one a
real challenge. The Merger Verger is no shrink so I will turn you over to others smarting than me for more details on diagnosing or identifying them (see links below).
What I will do here is offer some suggestions and words of caution on dealing with them.