A crucial part of any deal is getting the right messages across to investors, analysts, staff, customers – and the press.

A few disclaimers. First, PR is never going to turn a dud deal into a good one. No amount of communicating and spinning will persuade investors to part with their money if they think the numbers don’t stack up.

Hugh Osmond, for example, waged a spectacular PR campaign in his hostile bid for Six Continents in 2003.

But investors were ultimately unconvinced by his valuations. And when Philip Green made overtures to M&S, investors didn’t doubt his ability to turn the stagnant retailer around – they simply remained convinced that there was more value in the deal for Green than for them.

But there’s no doubt that getting your communication strategy right when doing a deal can add value.

As Fergus Wylie, chief executive of PR firm Gavin Anderson’s London branch, says: “Any bid or IPO comes down to value, however many hoops you go through. Good PR can enhance value and benefit a deal; bad PR can kill it.”

So how can you use PR to your best advantage during a deal?

If you are planning an IPO and don’t already have a PR agency on board, the first step is to hire one. Your brokers should be able to help you draw up a shortlist of firms they rate for the type of fundraising you’re doing.

On other deals, you’ll have to strike a balance between bringing PR in too soon (a waste of money if the deal doesn’t go ahead) and too late.

If you already have a retained PR firm, they should be able to integrate smoothly into the advisory team once you are confident the deal will go ahead.

And that can make the timing issue easier to deal with. “Too often, both sides get around to thinking about PR last, whereas often it ought to come first,” says Neil Bennett, managing partner at Maitland.

“The earlier we’re brought in, the better. If something leaks and the company is not prepared for the media attention that will come their way, it could be damaging for them.”

In the “don’t waste money” camp, however, is David Howell.?He was the FD of lastminute.com when rival online travel agency Travelocity’s parent firm Sabre made a £607m approach, it was up to him to handle the disposal side of the deal.

“My way of working is not to bring in PR the moment the clock starts ticking because things can go so far and then not happen,” he says.

“Remember, not every deal you look at gets into the public domain.” He brought in Maitland’s Bennett, who already knew the company well, after basic terms had been agreed at the due diligence stage.

On the “don’t leave it too long” side is Mark Bentley, finance director of marketing services company Cello. It made three acquisitions last July. College Hill, Cello’s retained agency, was brought in two to three weeks before the deal was announced.

“What can generate a lot of angst for a PR adviser is being rung up the night before an announcement,” says Bentley – who was FD of City PR firm Citigate Dewe Rogerson until last May.

“I have seen the frustration from the PR side at being told about a deal too late, so we try not to do this at Cello.”

Bringing a PR firm on board early can also mean you’ve got a watchdog to keep you from saying something you shouldn’t – although, truth be told, this is something you can handle yourself if you’ve got a mind to.

The rules are fairly clear-cut. You can also get your lawyer to walk you through what’s “public domain” and what’s not.

Handling the spin doctors

Whenever you decide to bring in your PR people, it’s important to keep the enlarged team up to speed.?Always try to be open and honest with your PR advisers.

After all, it’s their job to spin information, and if they don’t have any, they can’t operate. During the Travelocity deal, Howell held a daily 8.30am conference call with all advisers, lasting from ten minutes to an hour and a half.

Howell also recommends agreeing advisers’ fees up-front. Typically, PR firms will agree to a two-scale fee: hourly charges (which can be capped – say, at £50,000 for the entire deal), and a bonus if the deal goes ahead (say, 20 per cent of the hourly charge – though this too can be capped).

On the lastminute deal, Maitland’s fee was based on the firm’s costs, with an increase for success and a further uplift if the transaction price went above a certain level (which it didn’t).

Your PR adviser will help you work out a core message – “this is a great deal: here’s why you should support it” – and tailor it to your various audiences. Just remember our opening caveat: PR only goes so far.

Your PR adviser can massage and repackage your core message, but you and other senior management have the final say-so on what that message should be. And ultimately, your stakeholders want to hear that message from you and your CEO – not a third party.

The audience: investors and analysts

In an IPO, investors and analysts will be your key audience. The team at Foseco, a Staffordshire-based manufacturer of products for foundries and steel mills, had this in mind when they floated last May.

The company appointed Gavin Anderson on the strength of its experience in dealing with sell-side analysts. According to Paul Dean, Foseco’s FD, the firm added particular value on the investor presentation, and then on building analyst coverage following the IPO.

Foseco is a complex and technical business operating in 34 countries worldwide. It was also the first engineering company to float in London for five years. So making the most of the 40 minutes or so that management had with prospective investors was vitally important.

“We knew what the message was, but Gavin Anderson helped by looking at it much more objectively, and ensuring we communicated it in an articulate and clear way,” says Dean.

“They would say, ‘It’s too long, you should have these slides, you should accentuate that.’ For example, they said that we needed to explain to people what foundries actually do before we could explain how we fit into the industry – we’d just taken that knowledge for granted.”

Gavin Anderson has also played an active role in building up analyst coverage after the IPO, organising a trip to the company’s German manufacturing site.

This can be particularly important for a mid-sized company that may not naturally attract much media attention. After all, it’s not necessarily in the broker’s interest to increase analyst coverage.

And, Dean says, “the great advantage of using a PR firm is that they have all the contacts.”

He’s been surprised by how much extra work there’s been following listing.

“You tend to think that the float’s happened; we’re off,” he says. “But you spend a significant amount of time on IR post-IPO. You have to reiterate the strengths of your company and put your subsequent financial results in context.”

Investor communication was a trickier prospect in the lastminute.com sale. The offer was at a level less than half its IPO price – an important consideration for the company’s thousands of individual shareholders, many of whom had held onto their meagre allocation of 35 shares apiece since the flotation in March 2000.

The EGM initial vote to approve the deal hinged on the number of people voting, not the per cent of shares represented – so getting the army of retail investors onside was critical.

“We framed our argument by comparing lastminute with the many other internet companies that no longer existed,” says Howell. “We pointed out that at least shareholders were getting something back.” Proving that in PR, “good news” is a relative term.

The audience:?employees

Keeping staff informed and supportive during a deal is also vital. Deals usually involve change, which can be destabilising for the people involved.

Communicating a consistent message to employees on both sides of the deal was a priority for Cello when it made its acquisitions.

“Most importantly, new staff coming into the group need to be reassured about who Cello are – that we’re not bad news,” says Bentley.

“The message is very much ‘business as usual’ for both sides. You have to communicate quickly and clearly, and be calm and reassuring to the business that’s been bought. It’s important that they know you’ve done this before.”

Internal communication was even more critical for Queens Moat Houses, the beleaguered hotels group whose shares were de-listed in mid-2003.

The group was finally sold to a financial consortium led by Goldman Sachs in November 2004. Ashley Krais is QMH’s former CFO and deputy CEO. “In times of crisis, you need to hold together your internal team via strong communication,” he says.

“You must be open, honest and direct, and communicate often – and more often than you think you need to.”

That means telling them about major events – shareholder approvals, vote schedules, decisions to move offices – but also talking to them between those milestones. “We would sometimes say: ‘There is something going on and we can’t talk about it now, but we will tell you as soon as we can.’”

The key is to tell them about anything that might affect them, before they hear it from someone else.

Krais used “cascades” to get messages from management downwards: he would tell six people who reported to him, who in turn would tell six people, and so on.

Wherever possible, verbal communication was backed up in writing to make sure messages were consistent throughout the group.

The audience:?customers

Customers, on the other hand, shouldn’t be contacted unless absolutely necessary. Of course, if you’re about to do a deal that is going to affect them, you want them to hear it from you and not the trade press, for example.

But a constant drip, drip, drip of information can seriously annoy them (just think of all the junk mail that you trash as soon as you see the return address). Besides, you need to give the impression that it’s “business as usual”.

That’s why the lastminute web site didn’t carry any information for customers on the Sabre deal – it’s a consumer business and the goings-on behind the scenes were irrelevant to day-to-day operations.

On the other hand, Howell says, a B2B firm would usually do more in the way of customer communication, if only because they operate in tighter-knit communities.

What if customers start asking tricky questions? You can’t just dodge the bullet. One good idea is to prepare “frequently asked questions” – and answers – for all customer-facing staff, so they can handle queries in a pinch.

You should also institute a “reverse cascade” system: if a staff member doesn’t know the answer to a customer’s dilemma, he should send the question up to the next level, and so on, until an answer is found.

Is the press your enemy?

When it comes to the press, good PR is often (ironically) about keeping quiet. “We recognised that it was potentially going to be a long process, and felt that having the press riding every up and down was going to be very hard to manage,” says QMH’s Krais.

“We felt that playing a proactive PR game would be dangerous, so we played a dead straight bat.”

Mark Garraway of College Hill was closely involved in communication across QMH’s four main audiences – equity investors, debt holders, employees and the press – but spent much of his time dealing with journalists.

“Ninety-five per cent of what we did during those 16 months was geared towards keeping the story out of the press,” he says.

“We started off with six alternative strategic options that the company could take, and the key was not setting any particular hare running. Then, as these options were gradually knocked out, we had to make sure that one option didn’t seem inevitable.”

But liaising with the press did turn out to be the key to managing a dispersed and particularly difficult audience: QMH’s diverse lenders, many of them debt traders with a short-term and ruthlessly numbers-driven agenda.

“One of the most interesting aspects was the way the financial media came into its own as a channel of communication,” says Garraway.

“Because of the series of rumours and counter-rumours coming from the debt-holders – who operated very much behind closed doors – we would find anonymous sources being quoted in the press.

But we quickly found out which journalists the debt-holders liked to fly kites through, and managed the situation by being open with those reporters and telling them the truth.”

So while the emphasis was on keeping quiet rather than actively conveying particular messages, Garraway kept a small circle of journalists well-informed.

Krais’s advice to other FDs in a crisis situation? “You have to establish a clear PR strategy and make sure the whole team knows what it is,” he says. “I would certainly not have wanted to be in a position where the CEO was saying one thing and me another.”

But what if you are caught off guard, say, by a journalist who happened to get your mobile phone number? Broadly the rules are that, in an IPO, you shouldn’t say anything that isn’t in the prospectus.?

And in a bid, steer clear of anything that isn’t in the offer or defence document.

However, you need to strike a balance between coming across as uncooperative and running the risk of talking out of line. If you get asked a question that you are uncomfortable with, Wylie’s advice is to say that you’re in a meeting or can’t talk right now, and you will call them back later.

Then speak to your PR advisers – that’s what you’re paying those huge fees for – before returning the call.

Appointing a PR firm

First, you need to identify what you want from a PR agency. They can’t (and shouldn’t) take everything to do with communication off your desk.

However, a PR agency can:

• Help identify and create a communications strategy, and establish key messages.

• Act as eyes and ears; provide feedback on how the market or media is likely to react to an announcement.

• Work out media tactics – for example, find rated analysts or investors who are willing to support your story in the press.

• Provide media training for management.

So how do you go about choosing a PR adviser? Here are some of the questions you should be asking:

• Have they worked in your sector before? Do they have proven experience in situations you’re likely to be in, such as an IPO or acquisition programme? And make sure that this experience is within the team you’re being offered, not just from the senior partner in the pitch.

• Do they know the audience(s) you need to focus on? Ask analysts, journalists and so on which firms they rate.

• Do they have relevant geographic experience and coverage if cross-border work is on the cards?

• Can they think creatively? Your PR adviser should be able to find channels for media coverage that

no-one else has spotted.

• Do you like them? And what does the rest of your advisory team think? It’s vital that your PR adviser will mesh into the rest of the team and that you can take constructive criticism from the spin doctors.

Receiving a hostile bid

As accounting rules harmonise – making cross-border attacks easier – and certain sectors run short of targets, no company should feel invulnerable.

Moreover, there is a trend for predators to test the waters by threatening a bid without actually launching one. And once a company is in play, this usually paves the way for competing bidders to get in on the action. Once that happens, you’re into a PR quagmire.

Fergus Wylie, chief executive of Gavin Anderson’s London office, and other experts and FDs share their PR tips for dealing with a hostile bid.

• The best defence is making sure a bid doesn’t happen in the first place. So build and maintain relationships with analysts, investors and the press.

Research shows that investors rate companies on their management, strategy and financial performance – in that order. Beware of ignoring your financial audience and then expecting them to support you when the chips are down.

• Be prepared. If you know you are in a vulnerable sector – such as housebuilding – make sure you have a senior bid defence team identified and basic key messages in place.

Mark Garraway of College Hill suggests putting together a defence manual, rehearsing arguments as to why shareholders should back current management, identifying possible predators and whether they are likely to offer cash or shares, and establishing what price you would be prepared to accept.

• Rally your advisory team – and internal defence committee – quickly. If you’ve got an advisory team in place, by and large avoid changing them when a deal comes up.

• Make sure you are clear on what’s being offered, and understand the bid’s conditionality, advises David Howell. It’s not just about the headline figure.

• Move quickly. The 60-day timetable doesn’t give you a lot of time. But equally, don’t panic or act in haste: the first day often determines the outcome.

• Get a statement out as soon as possible – along the lines of, “The board recognises that x has made an offer, and recommends shareholders to take no immediate action.”

But after this there are no hard and fast rules about what to communicate and how often. Sometimes, it may be better to keep quiet and let the bidder exhaust their arguments (especially if you have been caught off-guard); at other times, a swift and (hopefully) fatal rebuff may be the right response.

• Try to grab the high ground. Keep the other party responding to you, rather than the other way around. Keeping the initiative is vital. In the Granada/Forte battle, Rocco Forte never shook off the criticism that he was on a grouse moor, not at his desk, when the bid arrived.

• Never work outside the advisory circle. M&A is a highly regulated environment, and speaking out of line could have serious repercussions – for you personally, or for your company.

• Don’t overlook internal communications. Staff can feel particularly vulnerable in a hostile bid.

• Don’t lie or misinform – you will always get caught out.

• And remember: in the end, it is always down to value. There may come a point where the price being offered is higher than the shareholder value you can reasonably create – and the best PR in the world can’t defeat that argument.

So know your limits. “Success” is sometimes just extracting a higher bid. The trick is giving the other side a good run for their money.

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Tags: pr firm, cello, communication strategy, internal communication, hostile bid, acquisition, investors, pr, media coverage, financial media, pr campaign, merger,

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