The World's #1 Source for IR Website
Best Practices and Intelligence
|
The World's #1 Source for IR Website
Best Practices and Intelligence
|
By: Dominic Jones
ON MONDAY, March 19, 2001, the world awoke to an announcement out of Melbourne, Australia, of a merger to create the world’s second-biggest resources company. Several hours later, another announcement crossed the wires about a merger to create the largest wholesale drug distributor in the US.
Aside from the coincidence of being announced on the same day, there were stark contrasts between how the two deals were communicated to the Street. Also notable were the sharply different reactions investors around the world had to the deals.
The merger announcement of Australia’s BHP and UK-based Billiton plc was precisely executed, clearly positioned and proactively communicated on both companies' websites. It was followed by enthusiastic buying of the companies’ shares.
By contrast, the link-up between US companies AmeriSource and Bergen Brunswick was, by many accounts, poorly communicated. It was followed a quick sell-off in the parties’ stocks.
Mergers often fail to impress
Of course, it's simplistic to explain the market's reaction to a merger by how
the companies use the web to explain their stories. There are too many structural
details and negative market perceptions about mergers to do that.
Indeed, it’s not uncommon for markets to react adversely to corporate combinations. A recent study for the Chicago Tribune by consulting firm A.T. Kearney of 50 large mergers between January 1990 and September 1999 found that 69 percent of the deals lagged their industry average in total shareholder return in the two years after the deals closed. Several other studies have found similar results.
In a bid to identify the commonalities underlying successful mergers, a smaller number of studies have tried to focus on the 30 percent of deals that do end in superior stock returns. These have led to the conclusion that there are just a handful of success drivers, ranging from a clear rationale to quick closing of the deal.
The importance of strong communication
One of these success factors is the partners’ skill at communicating
the deal to investors. In a December 2000 Harvard Business Review article on
friendly acquisitions, authors Robert Aiello and Michael Watkins cite the ability
to “enthusiastically sell a deal to stakeholders” as an important ingredient.
“Smart acquirers are swift to follow their final deal agreements with aggressive and carefully planned public relations and investor relations campaigns, often involving professional PR advisers,” say the authors.
This seems to ring true in the cases of the BHP-Billiton link-up and the AmeriSource-Bergen Brunswig combination. My assessment is focused on how the companies used their websites to explain the deals and the markets reaction to them on the day of the announcements.
The BHP-Billiton merger
 |
| BHP CEO Paul Anderson (left) and Billiton CEO Brian Gilbertson. |
Story breaks in the press: Unofficial news of a pending merger between the two companies broke on Sunday, March 18, in the London Sunday Business newspaper. Both companies refused to comment on the “speculation.”
Initial reaction from analysts to the idea of a possible US$28 billion merger between the Australian mining and oil group and the London-listed miner was less than favorable.
A Reuters article on Sunday afternoon quoted two analysts questioning the logic of a potential link-up. One suggested that any merger would be a shame since Billiton was a better managed company than BHP.
Monday morning confirmation: At 8:00 a.m. Melbourne time (11:30 p.m. on Sunday in London) BHP and Billiton issued a joint news release announcing their agreement to merge. The detailed 28-page news release -- headlined BHP and Billiton merge to create a premier diversified global resources group -- made extensive use of bullet points to highlight the rationale and synergies of the deal.
Two hours later, the companies held a joint conference call with analysts and media that was webcast live on both companies’ websites. The two CEOs swapped home cities for the conference call. London-based Billiton’s Brian Gilbertson hosted the conference call from BHP’s Melbourne headquarters. BHP’s Paul Anderson was in London, where he would later host a meeting with European analysts and media.
The tightly-scripted webcast featured audio with synchronized slides. It began with a brief, enthusiastic statement on the deal from Anderson in London before Gilbertson gave a 30-minute presentation entitled Strength – Flexibility – Growth that pitched the strategic rationale and growth benefits of the deal.
Special merger section on BHP website: Anyone visiting BHP or Billiton’s website that day was quickly alerted to news of the deal.
Billiton’s site used a scrolling text link at the bottom of the homepage to link visitors to a presentation page where they could access the press release, view the Australia or UK webcast and download the presentation. A detailed explanation of the deal was made available in MSWord downloads in English, French, Spanish and Portuguese.
 |
| Billiton's merger presentation page provides information in several formats and languages |
BHP’s homepage featured a prominent article that was above the fold that dominated
more than half the page. This was linked to a special “BHP-Billiton” merger
site featuring a rich array of information on both companies.
 |
| Details of the merger were clearly sign-posted on BHP's homepage. |
A photograph of the two CEOs shaking hands was prominent and set the tone for the merger page. The photo was later replaced by another showing the two executives engaged in discussion. Also prominent was the merger tagline: “strength : flexibility : growth.”
Highlights on the merger site included:
 |
| The BHP-Billiton merger page presented an unified message and showed the two CEOs getting down to business |
The market reacts: Despite the earlier negative
comments from analysts before the official announcement, shares of BHP climbed
immediately on the opening of trading on the Sydney Stock Exchange. Later in
the US, BHP ADRs also climbed higher. At the close, the Australian shares were
up 2% while the ADRs closed 4% higher.
Trading in Billiton was more enthusiastic due to the structure of the deal
and speculation that a counter bid might be made for the company. The shares
closed up 13% in London after earlier climbing almost 20%.
The AmeriSource-Bergen Brunswig merger
Announcement crosses the wire: At 7:00 a.m. Eastern Standard Time on Monday, March 19, a joint news release announcing the merger was sent out by Business Wire. The 2,000-word release was headlined: AmeriSource and Bergen Brunswig to Combine, Creating a $35 Billion Healthcare Services Company.
Rather than using bullet points to explain the rationale and cost-saving synergies that would result from the merger, information in the release was presented in long quotes from the companies’ CEOs, Robert E. Martini of Bergen Brunswig and R. David Yost of AmeriSource. This made finding key details of the deal more difficult that with the BHP-Billiton news release.
The level of detail was also much less than in the case of the BHP-Billiton deal. As well, the first paragraph of the release was inconsistent with its headline. While the head referred to the merger as creating a $35 billion enterprise, the lead paragraph said the combined companies would have a total capitalization of $7 billion. The larger figure in the headline referred to the combined annual revenues of the companies.
The CEOs of AmeriSource, based in Valley Forge, Pennsylvania, and Bergen-Brunswig, based in Orange, California, held a conference call in New York with analysts at 10:30 a.m. The call was broadcast live on AmeriSource’s website. Later at 1:30 p.m., the companies hosted a presentation with analysts, which was also webcast live.
Company websites give little info: Anyone arriving at AmeriSource’s website would have had no idea that the company has just entered into the most significant deal in its history. The homepage, and for that matter the main investor relations page, made no mention of the merger.
The only mention to be found was in the news releases section, and even then it was obscure. A link to the investor community presentation was positioned at the top of the news release page, but the title made no mention of what the call was about. The first clear indication that a deal had just gone down appeared further down the page via a link to the news release.
 |
| The only mention of the merger on AmeriSource's website was in two places in the news release section. |
Bergen Brunswig’s homepage gave only slightly better treatment to the merger.
At the top left of the page, a link to the merger release appeared at the top
of a list of recent company news releases.
However, had anyone arrived directly at Bergen Brunswig’s investor relations homepage, such as via a bookmark, they would have found no information about the deal.
 |
| Bergen Brunswig's IR homepage made no mention of the merger |
The market reacts: The market’s immediate reaction to the announcement was decidedly negative. Both companies’ shares fell, with AmeriSource ending 6.77 percent down at the close and Bergen's 0.4 percent lower. The shares of both companies continued to weaken over the days that followed.
One reason put forward for the sell-off in the companies’ shares was offered in a Reuters story that moved on the afternoon of the announcement. It quoted A.G. Edwards analyst Andy Speller as saying that companies had issued too little detail about the cost savings that would be realized from the merger.
Well-planned web communication works
What message should we take away from the BHP-Billiton and AmeriSource-Bergen
Brunswig cases? Obviously, how they communicated their stories on the web cannot
fully explain the market’s different reaction to the deals. There were a large
number of strategic, financial and other factors involved.
Clearly, though, a comprehensive communication strategy and good first impressions do count. By using the web to maximum effect and creating a special merger site, BHP and Billiton gave the impression that their union was well planned and thoroughly considered. They presented a unified front and turned the initial unfavorable reactions into positive ones by providing the detailed information analysts and investors needed to reach an informed opinion of the deal.
By contrast, AmeriSource and Bergen Brunswig provided less detail and did not seem to have a clearly defined communications strategy. This gave the impression, right or wrongly, of a disorganized, hastily arranged marriage.
Perhaps in business, as in life, a well-executed wedding is indeed a portent of a long and happy marriage to come. Well, a part of it anyway.
This article has been printed from IRWebReport.com. Copyright Clarity! Communications of Canada Inc. 2000, 2001, 2002, 2003, 2004, 2005, 2006. All rights reserved. This material may not be copied without permission. To obtain reuse rights, please contact us using one of the methods provided at www.irwebreport.com/contact.htm