Investor Relations

IMPLEMENTING BEST PRACTICES IN INVESTOR RELATIONS 1153.5.5 Mergers and AcquisitionsMergers and acquisitions (M&A) must be announced in accordance withregulations governing sensitive and insider information.Takeovers often catch the market off-guard. Announcements should becarefully prepared and the IRO duly organized, possibly with the assistanceof advisors if the Investor Relations team has little or no experience in thisfield. In particular, provisional statements will have to be drafted for everyeventuality, in case rumors of the deal are leaked early, the deal itself collapsesor is pulled off.M&A communications is conducted in accordance with the followingprinciples: All parties should keep the transaction confidential until the lastminute. At least one press release should nonetheless be kept on hand, forexample, in case the press gets wind that a transaction is imminent. The justification given should be solid, credible, and perfectly inkeeping with the company’s strategic messages. You don’t want to leavestakeholders to draw their own conclusions. The valuation applied should be clearly laid out, as should theprojected financial impact and the anticipated benefits along with whenthey can be expected to feed through. A detailed integration roadmap willalso be provided. These are the most challenging messages to prepare andthe ones the market will be most interested in. Unfortunately, most pressreleases issued to announce acquisitions fail to provide this information.True, this may be because full details are not yet available because the completionof the transaction remains subject to a number of conditions. Whilequantifiable synergies are always a strong positive in this investment case,management may be reluctant to commit on precise numbers much beforebecoming actual owners of the business. In some cases, the evaluation processis still underway, or the working assumptions still contain too manyvariables. The financing terms may not be finalized. Be that as it may, themore quantitative data analysts assess the consequences of a transaction onthe company’s future profitability, the better the chances that the marketwill welcome the deal.Investor Relations should also address any impact in terms of humanresources and corporate culture insofar as the deal can affect operationsmanagement, staff levels, or the values of the companies involved.If not properly marketed, even acquisitions that are strategically beneficialfor the buyer will put pressure on the share price for a long time. Allcommunications relating to acquisitions should, therefore, be prepared inadvance with the IRO, the person who can most effectively help management