Building Support for a Large Transaction

The Situation

LHA’s client was a mission-critical communications services provider, which, having increased sales and profits through organic expansion as well as technology and product acquisitions, was primarily viewed as a growth story by the investment community. It now contemplated a transformative, and as yet unfinanced, acquisition of a discontinued division of another public company. This transaction would roughly double consolidated revenue and scale revenue from a single, poorly understood division (with slow revenue growth, higher margins and strong cash flow) from 20% to over 50%. In addition to the communications challenge of educating equity and debt investors, employees, suppliers, customers and the media, the deal would also immediately skew the company’s investment thesis toward a value orientation that might disjoint existing institutional ownership.

LHA’s Solution

As a member of the client’s task force appointed to prepare for the acquisition announcement and surrounding events, LHA:

• Developed a message set for equity and debt investors and the financial media, suitable also for the deal’s upcoming financing that focused on the combination’s key selling points: increased scale, improved competitive positioning, high recurring revenue, higher profitability and cash flow generation, integration synergies, earnings accretion, and the company’s ability to support the additional debt burden of deal financing well.
• Crafted audience-specific communications for investors, both companies’ employees, customers, suppliers and reporters, including press releases, conference call scripts and slides, internal memos and video, external letters and Q&A.
• Liaised with the target’s management and communications teams to coordinate, control and manage messaging and timing of the announcement, as well as post-announcement inquiries.
• Armed all internal and external communicators with final documents, ensuring they were presentation and Q&A trained, as well as coordinating them to be ready to act when the deal events kicked off.
• Conducted media outreach, arranged interviews and prepared management.
• Fielded incoming calls from investors and reporters.

LHA’s Results

The careful positioning of the deal and the client’s resulting new investment thesis, supported by a strong educational messaging component, attracted value investors who smoothly cycled in as growth investors cycled out. Overall, the communications was a clear success: Wall Street embraced the strategic rationale for the deal, the financing to support the acquisition was completed easily with debt investors, and, employees, customers and suppliers absorbed the messaging well. Rather than driving a stock price increase, the challenge here was to prevent a decline, and the stock indeed remained resilient through all event communications.