Comment: The language of takeovers

Aug 18, 2010
<p>Companies like to rouse emotions during M&amp;A battles</p>

Breaking up is hard to do, as the song goes, and no one disputes it. Yet when it comes to corporate transactions, it is often the contrary that proves true.

In the corporate world, the process of getting together tends to start off rather like a messy divorce. The merger of two entities starts out as a declaration of all-out war rather than a loved-up courtship followed by an extended honeymoon.

For those on the receiving end of an unsolicited advance, the first course of action is invariably to noisily – and angrily – rebuff the would-be acquisitor. No company on the end of an unsolicited bid is going to accept the first stingy offer politely.

We all know the sensible rationale for this. PotashCorp’s stark rejection of BHP Billiton’s advances is a case in point: less than 24 hours after BHP’s $130-a-share approach was deemed ‘grossly inadequate’, the mining giant sought to bypass PotashCorp’s board by appealing directly to the firm’s shareholders.

The rhetoric of takeover bids makes for gripping verbal jousting between bidders and targets. Language is often evocative, intended to stir emotion and rouse sentiment.

Shareholders may be the primary audience for the information distributed at takeover time but they are not the sole recipients. This jousting, while necessary, is confusing, especially for employees and the public at large. In the case of Cadbury/Kraft, the British chocolate maker even managed to rouse a quasi-nationalist sentiment among members of the public; its M&A communications were consumed by everyone from institutional investors to chocolate-loving children and Cadbury workers almost as readily as the confectionery itself.

Fertilizer may not be as tasty as chocolate but the Canadians are still apprehensive about losing another one of their biggest companies to foreign ownership. The mining company will have a tough job on its hands. The audience for the financial information reported in forecasts disclosed during takeovers is more complex than in routine reporting situations (such as annual reports), yet the information is also read by a wide variety of stakeholders. Doubtless, it’s a difficult thing to get right, especially when the Canadian government is watching your every move.

At a seminar on the communications issues arising from the Kraft/Cadbury takeover held earlier this year, communications professionals from Cadbury explained how difficult it was trying to make the case for the merger to their employees and stakeholders after several months of staunch rebuttals. Many employees were confused to see their bosses getting into bed with the ‘enemy’, and explaining the new happy union was a difficult task for Cadbury’s senior management.

The outcome of the BHP/PotashCorp entanglement is anyone’s guess, but one thing is certain: no one will be merging quietly or politely.

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