MDM Podcast: The Communication that Determines M&A Success

If you’re an MDM newsletter subscriber or just have spent any time poking around our website in recent weeks, you’ve noticed a flood of merger & acquisition news here at the start of 2023. There have been many times when I or our other editors have been in the middle of writing a news brief on the latest deal announced when another such item — or several — has shown up in our emails or newswires.

It’s been a challenge to keep up with, but also is great to see such strong activity despite ongoing economic uncertainty.

Amid all of this activity, it’s easy to overlook that these distributors and manufacturers involved are organizations of people. When thinking of M&A, one typically thinks of market share and product lines gained, geographic expansion and how the ERP integration will play out. What doesn’t immediately come to mind — but should — is the people involved and how they will be impacted.

Do cultures align? What staffing redundancies will result? Are both staff groups open to change? These are essential questions to answer as distributors and dealmakers are developing a deal.

This was the focus of our latest MDM Podcast episode, which featured CEO Tom Gale and Jennifer Fondrevay, author and founder of M&A consultancy Day1 Ready. (Fondrevay also will be the keynote speaker at MDM’s Virtual M&A Summit Feb. 22-23.)

Among the several topics discussed during the 30-minute conversation, Fondrevay said that companies need to involve their frontline leaders as early in the M&A process as possible.

“One of the things that I find interesting, and where I really spend a lot of time with CEOs and business owners, is the sooner you can involve your leadership and your next level down — meaning those people who are really the frontline leaders, people who are making things happen — the more you can involve them in, not necessarily the decision-making process, but making them aware of ‘This is what we’re pursuing; here’s how we’re looking at it,’” she said. “And getting their input for what it will take. What are the resources? The timing? It’s those leaders who do that level of buy-in upfront where I’ve seen the greatest success.”

And communicating with staffers after a deal is done can be just as important as getting input while the merger or acquisition is being negotiated, Fondrevay said. Some leaders may mistakenly signal that it will be business as usual after a deal closes, but that’s hardly ever the case.

“There’s often a sense of communicating that nothing’s changed, right? We’re gonna keep doing the great things that we’ve always been doing,” Fondrevay said. “But the reality is, things have already changed just by the fact that you’ve gone into a partnership with another company, whether it’s a merger or an acquisition. And when you say nothing has changed, your workforce, what they hear is, ‘Well, this person isn’t going to be upfront about anything, because everything’s already changed. How I’m going to do my job is in question. I’m not even sure I still have a job.’”

Because announcements surrounding M&A activity can often be painted in a negative light, leaders from all involved companies need to “paint a picture” for employees regarding what the company will look like once a deal is finalized, she said. Fondrevay said that pinpointing that vision helps people when a leader announces not only that the deal is happening but what that deal will mean for the day-to-day workplace. It allows those involved to more quickly understand the role they can play and how they might contribute to that vision, she said.

Once a deal is finalized, it’s also imperative that leaders undertake a planned integration with a cohesive culture as the focus — to avoid an “us-versus-them” narrative from taking hold, Gale pointed out.

“That’s a big part of the work that I do: helping leadership on both sides of the partnership,” Fondrevay said. “Oftentimes, there’s an assumption of ‘we’ve had dinner together, the leadership, we’ve gone out, we’ve enjoyed steak, we’ve had great wine, I really liked these people.’ That can work. But culture goes so much deeper than that.”