In the past six months, almost all of our clients have considered acquisitions, either as buyers or sellers. Two of our clients represent both ends of the spectrum: iDEFENSE was acquired by VeriSign (NASDAQ: VRSN) and Astea (NASDAQ: ATEA) acquired FieldCentrix.

Best Practices

How do you communicate the value of the transaction to customers, prospects, employees, suppliers and investors?

Messages
Communicating to Stakeholders
The Price
Interview Strategy
Monitoring Coverage

Quiet Planning

Often, the biggest challenge is keeping quiet. Word on the street tends to leak, and there’s great temptation to share early news, even among public companies. While it may not derail the deal, it can delay it with regulatory investigation; it can also introduce uncertainty among customers, undermine the pipeline, and drive down the valuation, especially if revenue falls short.

Buyers and sellers often have very different views of how to present the deal. The seller usually prefers to speak of it as a merger of near equals, especially if there is an earn-out provision with future revenue targets. Buyers, on the other hand, can use the transaction to communicate fiscal strength to the market, and make clear that they’ll be defining future direction.

Both parties should create a clear set of messages. It’s often best to do this separately, particularly for the seller, and negotiate from there. Many sellers draft an early ‘acquisition release.’ Even if it’s not the official document, it can help shape the final product.


Key Documents for Consistent Communication

• Joint letters to customers. These are best when they’re extremely consistent, and signed by both companies’ CEOs. If you promise to visit, or call, do; this is an early test of your future credibility.
  
  
• Q-and-As for each stakeholder group. This includes employees, even those who never speak to the media, but may be asked about the deal by customers, friends, or even neighbors. Make the top messages crystal clear about what the acquisition means, and why it’s good for the listener. Be honest about staffing changes, even if it means you need more time to finalize this course of action.
  
  
• Sales materials. Redirecting the Web site is a natural, of course. Equip the sales teams with a new template, even if a new presentation is still a few weeks away.
  
  
• Media outreach. Be available on the day that the news moves, then hit the road within 90 days. The news will still be fresh, and you’ll have more to share about your future.
  

The Price: How Much Do You Share?

Material acquisitions need to be announced within three days of completion, and typically include the sale price. Private companies that have not disclosed previous funding rounds are under no obligation to share the multiple.

However, some reporters, especially those with investor-oriented publications, may try to reach their own conclusions by asking what may seem to be innocuous questions about prior revenue; the entrepreneurial seller, enthusiastic about the company's accomplishments, may reveal more than is wise. We've seen reporters use this incomplete collage to draw incorrect conclusions, and post their findings without stopping to check their facts.

The Best Strategy for Interviews:

• Stay on message
• Have Q-and-As at hand, and run through a sample interview before the news moves
• Know what you’re willing to disclose
• Have someone audit all interviews to provide valuable perspective if the conversation is veering off-course
• Monitor coverage, especially online outlets, for accuracy
• If a reporter makes a mistake, communicate quickly. Explain why they’re wrong, and how the text needs to be changed. Require a correction if the news is distributed to subscribers.