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Smoothing the transition.

Friendly takeovers -- or mergers -- are fast becoming the preferred trend of the '90s, as companies seek to combine strengths and minimize weaknesses to compete in global markets.

Much has been written about antitakeover tactics and the director's role in a hostile takeover, but what about the director's role in the friendly takeover?

We know from experience that directors can be of tangible value to the success of a merger, particularly in that delicate period of time between the announcement and the effective date of the transaction.

When Pacific Resources Inc. was acquired in a friendly takeover by the largest publicly held company in Australia, Broken Hill Proprietary Ltd., we set up a number of activities for our directors which played an important role in ultimately gaining more than 98% of our shareholders approving the merger, approval by the Public Utility Commission (due to our gas utility subsidiary), and overwhelmingly positive response in the Hawaiian community.

Based on our experience, we've identified ways that directors of both the acquiring and the acquired companies can help make the merger a success.

Executives, employees, customers, suppliers, and government entities are apt to be jumpy about the future and what it holds for both the soon-to-be-combined entity and their own interests.

Once the deal has been inked, the director is, of course, under no obligation to assist further, but the expertise, influence, and abilities so useful as a director can now be of great service in smoothing the transition for all concerned.

Checklist for the Acquired Company's Directors

The following is a checklist of actions you can take that can help:

1. Talk positively about the benefits of the merger. Be sure that the "opinion leaders" of the community and the company understand why it's a good deal.

2. Take every opportunity to speak, be interviewed, and put the merger in a positive light. It's a good idea to check with the Public Relations Department to be sure that what you're saying will complement the public stance of both the acquirer and acquiree.

3. Interact with the acquiring company to be sure all things agreed to are being done and to make sure the transition is as easy as possible.

4. Offer your particular expertise to the acquired company's executives and to the acquiring company's management to help smooth the way.

5. There will be a high level of uncertainty among many corporate audiences, but employees feel this particularly. Participate in meetings or events and share your perspective with them. The word will get back.

6. Assist with presentations or panels before community groups, approval entities, stockholders, or end users of the company's products or services. You can provide a comfort level to the acquired company's stakeholders as a proponent of the merger's benefits.

7. Help reduce any "culture shock" by identifying key company or country cultural characteristics of the acquired company and the acquiring company to assist in communications. This will help reduce the "different worlds, common language" syndrome.

8. Monitor management's performance during the interim period, make changes where necessary, and watch out for the shareholders' interests.

9. Offer to help set up an advisory board of key ex-directors who may assist the acquiring company after the acquisition in matters of community or government relations for a limited transition time. This can be of special value if the acquiring company is either foreign or located elsewhere, and will help reassure key audiences.

10. If you are a company executive who is also a director, you can play a special role in making appropriate introductions of the acquiring company's management and directors to key opinion leaders, government officials, and major customers during the transition.

Checklist for the Acquiring Company's Directors

If you are a director of the acquiring company, you can assist with any or all of the above plus assist with several other areas:

1. Set up mechanisms to be sure the acquisition goes smoothly.

2. Be the nonoperating link to both the outside and inside world -- the "eyes and ears" during the interim period.

3. Ensure continuity of activities which will assure the communities in which the newly combined company will be doing business, including community relations, corporate philanthropy, government relations, and the investment community.

4. Make an effort to become part of the transition team by meeting with the "surviving" management of the merged company and learning about their expectations and management style and identifying business issues that need to be addressed immediately.

5. Pay attention to human resources concerns, such as compensation, incentives, job security, efficiencies, and how the company plans to manage its subsidiaries to ensure success.

Directors of both the acquiring and acquired companies have a unique opportunity to creatively tackle the myriad problems that could potentially arise in a corporate merger. With a positive plan of action and a willing, expert team of directors and management, all constituencies can ultimately benefit.

Andrea L. Simpson is Vice President -- Corporate Communications for Pacific Resources Inc., the Hawaii-based energy company. She joined the company in 1978.
COPYRIGHT 1992 Directors and Boards
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Mergers and Acquisitions; how corporate directors can facilitate a successful merger
Author:Simpson, Andrea L.
Publication:Directors & Boards
Article Type:Column
Date:Sep 22, 1992
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