Dix & Eaton’s Chas Withers
Don’t underestimate the importance of messaging when negotiating a transaction
Chas Withers estimates Dix & Eaton has provided client counsel to transactions totaling more than $50 billion in the past few years. The experience and the high stakes that were involved in each deal has given Withers a unique perspective on the value of messaging when it comes to completing a deal.
“One of the most important things companies sometimes forget about is you’ve got shareholders, stakeholders, employees, communities in which you operate, all of whom have some interest in this and they’re going to translate those transactions from their individual vantage point,” says Withers, CEO at the integrated communications firm. “So how you do tell a consistent narrative that ties all that together and also connotes what the value of this deal is going to be?”
Dix & Eaton has worked with a number of high-profile clients in numerous capacities, including Forest City Enterprises, Sherwin-Williams and Southwest Airlines, just to name a few.
In this week’s Dealmakers Live, Withers talks about the importance of building a strong and consistent narrative when you’re making a deal. What follows is a transcript of the above video, edited for readability.
Make messaging a priority
A significant portion of the work that we do has some sort of transactional componentry to it, whether it’s mergers, acquisitions or divestitures. Increasingly in a world where activism is playing as prominent a role, especially with publicly traded companies, the role we often play is we’re brought in to assist when a deal is going through, whatever that looks like. To help keep all the different audiences on the same page, that’s the messaging, that’s positioning with the street.
One of the most important things companies sometimes forget about is you’ve got shareholders, stakeholders, employees, communities in which you operate, all of whom have some interest in this and they’re going to translate those transactions from their individual vantage point. So how you do tell a consistent narrative that ties all that together and also connotes what the value of this deal is going to be?
Why is this a good deal?
I think there are two vantage points to think about counsel from the outside. One is often mitigating risk. You need someone that not only understands the business, but understands, especially if it’s a publicly traded company, what are the regulatory and disclosure issues that might be pertinent and might cause some agita if they are done the wrong way. Then the second piece is obviously getting the most value out of any deal.
If you’re bringing two organizations together, I was involved in a deal last year where two global organizations were coming together — one European-based, one U.S.-based. Complementary businesses, but huge enterprises on their own. So how do you put those things together? Then how do you tell a story that’s going to explain to all of those different constituencies what’s the value of that, why does this make sense and why does it make sense now?
I think it’s incredibly important to have experience represented there, somebody that understands how to put together that compelling narrative that talks about why this is a good deal.
Riding the ups and downs
You go into any deal and you hope that everybody is on the same page. What we find causes more challenges than anything else is you get a management team that is not aligned to a board. Or you get an employee group that is not aligned to a management team. Or you get two companies trying to come together and you’ve got such disparate cultures or even differences of opinion on valuation that that dance back and forth can get really challenging.
So in each one of those circumstances, it’s really important to have the experience to understand this is going to play out. It’s a process. I can’t tell you how many times we’ve been involved in a deal where you get all the way to the finish line and then something transpires and either the deal goes away or it gets shelved for some period of time. A sophisticated view of that is no deal is done until that deal is actually done. The challenges are just part of the process as it plays out.
Activism in dealmaking
One of the circumstances we see very often these days is when activists or unsolicited bidders have come in on a deal. The board may be privy to what the situation is in a fulsome way and the management team may not. So people are being brought into the tent on a staged basis. What that means is the flow of information is really constricted, which means crafting a narrative and having it get communicated to all those key audiences in a structured way is going to be a real challenge.
That’s just part of the process these days. Activism is not going away, it’s going to become more and more prevalent. You now have so many more activists on boards that are creating involvement in deal flow. But I think one of the things that people should expect is you’re not going to have full purview into the details of a deal oftentimes until very late in the process. That’s not the ideal, but I think it’s just a fact of life that we have these days.
Tell a consistent story
So if the rule of thumb is we want to get the most out of any deal that we do, our strong experience has proven out that the more you can get audiences on the same page to help them understand what this is going to mean for them and what the expectations are going forward, the better off the deal is going to prove out to be.
But that’s different with every company. Some companies want to place things much more close to the vest. Some companies have much more of a proactive mindset. They want to really take their story out because they think there is something to be won from that. Our counsel oftentimes is make sure you’ve got your story bulletproof and down pat. Make sure that everybody is going to tell a consistent story. Then stage it in a way that you can bring everybody into that story in the right mode.
But it’s not an easy thing to do. Oftentimes, you’re dealing with extraneous factors at the last second, last-minute changes, last-minute changes to valuation. But it’s just proven out so many times over the course of $50 billion in transactions that we’ve done in the last few years that the more you can keep all of those parties appraised, apprised, understanding of what this is going to mean for them, the better off you’re going to be.