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Executive Summary:
On <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />7 April 2004, SP Telecommunications Limited announced it was to acquire NBN Television.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
This was an important announcement because of its wide reaching implications for Australias telecommunications and media markets.
In fact, it was the first example in Australia of what is called convergence, which is the utilisation of digital technology to enhance both businesses in television and telecommunications.
Convergence has been happening in overseas markets but this was the first time here.
So not only was this an important announcement that needed communications advice but underlying the announcement were a number of sensitivities that had to be managed.
Management of key messages for this transaction was to be critical for the events that would follow, namely seeking shareholder approvals from seller and buyer and seeking funds from shareholders and the capital markets to bring the transaction to fruition.
The sensitivities were not around conflicts of interest but to make sure the markets realised the transaction, involving closely connected parties, was operating at arms length and for us to be at the ready if any unusual events took place.
By June, the transaction was settled, with all approvals in place and funds raised, assisted along the way by our communications program.
The main elements of our communications program were to manage the messages and to achieve widespread media coverage for the initial announcement of the transaction, while riding shotgun around issue sensitivities to ensure communications aspects of the transaction went to plan.
Communications around all aspects of the transaction were transparent and provided full disclosure while presenting quite persuasively the merits of the transaction.
We managed several announcements during the transaction, with each achieving widespread media coverage and communication of key messages to the investment community and shareholders.
The ultimate evidence of the value of our communications program was a successfully concluded transaction, with a fully informed market and a higher share price resulting, coupled with a consideration of value lost if our communications advice was not used.
Situation Analysis:
The initial conversation between a group director and financial adviser to the SPT/NBN transaction (Dave) and Ian Westbrook (Westy) of Westbrook Communications provides the situation analysis:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
DAVE : Ive got a job for you Westy and its gonna need some good communications management, mate
WESTY : Thanks Dave, youve come to the right people
DAVE : Well, were gonna put SPT and NBN together, mate, because we reckon one plus one will equal three but you can see the sensitivities. Soul Patts owns all of NBN as well as 54.9 per cent of SPT so were gonna need approval from both lots of shareholders and we dont want any spoilers in the market.
WESTY : Sure Dave
DAVE : We want everyone to see that its straightforward, mate, with both sides getting independent advisers, so that has to be emphasised. We also want people to understand what convergence is all about
WESTY : Sure Dave
DAVE : When we spun off SPT back in 2000 we wondered then about keeping the businesses separate but it seems we made the right decision since SPT has been so successful
WESTY : Thats true and you had good communications advisers then, too
DAVE : Mate, we want to get across the idea theyre both good businesses and that when theyre combined theyll be even better and in the right spot to really take advantage of all those advances in digital technology. The businesses are close anyway but under the one umbrella we want people to understand were really giving them a chance to add more value. SPT will be re-rated by the market and its size will attract more institutional investors. Youll know how to say all that
WESTY : Sure Dave
DAVE : Now you know Denis is wearing a lot of hats, mate, since he represents both SPT and NBN, so as spokesperson he'll need to make clear the arms length nature of the transaction and that were putting together a bigger future
WESTY : Sure Dave, Denis will be good at that and well help with the key messages
DAVE : Well youve got the job, mate, so well be expecting it to be up to the usual top standard
WESTY : No problem there, Dave
The following table presents the situation analysis in the form of the challenges we faced:
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CHALLENGE |
OUR INPUT |
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Overall An interesting transaction, with sensitivities, involving two companies which do not have a high corporate media profile or a tradition of regular finance media contact |
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A telecommunications business, covering wholesale and retail markets, but with business descriptions often involving technology jargon |
Development of easily understood explanations of the business |
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NBN A successful television business but a regional and so out of the mainstream of general familiarity |
Development of explanations and selling points |
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Convergence An unfamiliar topic requiring persuasive explanation and simplification of technology jargon |
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Arms length A transaction involving closely connected companies which needed to be presented as properly and independently going about the process of merging |
Clear presentation of the elements of independence and approvals required for finalisation |
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Multi-role spokesperson Chief spokesperson involved in both businesses required to put dispassionate but persuasive perspective |
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Investor persuasion The merits of the transaction had to be presented to communicate the idea that the merger of the two businesses would create a bigger future |
Explanation of the business value created by the combination of the businesses compared with their separate operation |
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Preparation for the unknown Consider market possibilities and responses |
Scenario consideration |
Research:
Research we undertook to implement the program included:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
- background material provided by SP Telecommunications covering:
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- the business and its technology
- convergence and its benefits
- Annual Reports of SPT and WH Soul Pattinson, providing background information on seller and buyer
- meetings with relevant executives regarding aspects of the transaction and sensitivities
- internet research on convergence
- media and investment community databases to refine target markets
- regional media markets for dissemination of news relevant to the business markets of SPT and NBN
Target Policies:
Principal target markets were the media and investment community with them acting as influencers of shareholders<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Components of the media targets were:
- telecommunications and media writers nationally
- <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Sydney business/telecommunications writers able to attend a media briefing
- Interstate business/telecommunications writers interested in a phone hook-up for the briefing
- Newcastle Herald, local paper for both NBN and SPT
- Regional media relevant to the business markets of NBN and SPT
Investment community targets included:
- specialist industry analysts and company followers of SPT and WHSP
- the wider investment community nationally, principally stockbrokers
Communication Strategy:
Implementation:
The strategy we adopted and implemented is explained below:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
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ISSUES |
STRATEGY |
IMPLEMENTATION |
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Media focus and positioning |
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ISSUES |
STRATEGY |
IMPLEMENTATION |
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Transaction sensitivities |
Devise list of various sensitivities to be considered, eg
Incorporate sensitivities into program management plan, covering each of them in initial announcement and media briefing Assess media reporting to see whether a back-up plan to reinforce understanding of issues might be necessary |
Management of the sensitivities in the following ways:
Media analysis showed these sensitivities were managed well |
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Convergence, technology jargon |
Distil descriptions into simple English descriptions in the body of the announcement rather than lengthy backgrounders which lend themselves to adoption of jargon Incorporate company brochures in media kits for colour amplification |
Extensive drafting and distillation of background material to key points in main announcement Preparation of media kits, with night before distribution to interstate journalists joining hook-up |
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ISSUES |
STRATEGY |
IMPLEMENTATION |
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Media briefing management |
Prepare Q&A around key issues to ensure preparation Prepare grabs for media contact, over the phone and with electronic media Arrange neutral briefing for announcement but with relevant connection |
Distribution of and discussion of briefing package in advance of media briefing Arrange briefing at offices of ABN Amro Morgans, stockbrokers which would be involved in capital raising for the project as a way of linking them to the transaction |
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Story evolution |
Sell the big idea to begin with so that this becomes what people are understanding, with the mechanics becoming details Follow up later with details that explain how the big idea becomes practicality |
Announce convergence and the acquisition as the big idea Next announcement covers pricing, independent reports, capital raising and shareholder approvals |
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Crisis watch |
Monitor media daily for relevant issues that might crop up that may cause concern for the smooth path of the transaction |
Alert actioned around a government inquiry around a tender won by SPT in which the consultant to government was a shareholder in SPT Crisis defused by company contact with government and the issue not being substantial |
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Finalisation, new name |
Link finalisation of the transaction with the new name for the merged group |
We highlighted the need for a new name in our initial communications strategy As a result of the successful acquisition of NBN by SPT, SPT became SP Telemedia While this information was available in documentation for shareholders, it was not highlighted until we announced finalisation of transaction |
Results:
Among measurable results were:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
- widespread media coverage, especially in key target media
- extensive coverage in the homeland media around <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Newcastle and relevant regions
- perpetuation of key messages in the media
- successful implementation of the big picture first, details later strategy
- successful media briefing by tripartite spokespersons
- creation of positive market sentiment around the acquisition
- flow on of this sentiment to achieve shareholder approvals and fully subscribed capital raisings
- successful completion of the transaction and promulgation of the new name of SP Telemedia
- a higher share price immediately after the initial announcement, followed by an improved market rating subsequently
Evaluation:
The table below evaluates outcomes in relation to objectives<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
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OBJECTIVE |
OUTCOMES |
EVALUATION |
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To present persuasively the business value of the transaction |
Successful presentation at the media briefing Perpetuation of this in media coverage Reporting of the one plus one equals three idea |
A positive external assessment of the transaction as a result of our presentation of the story simply and persuasively |
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To make clear the transaction was at arms length |
Overt public recognition of the closeness of the two companies Reporting of the appointment of two independent experts by both companies · Explanation of the processes to be pursued to seek shareholder approval and market support of the transaction Reporting of the processes straightforwardly Ultimate approval and successful finalisation of the transaction Positive market reaction |
Positive media reporting and market reaction were a result of being clear about the process in the initial briefing It was assisted by the tripartite spokespersons roles Q&A preparation was critical in this regard |
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To achieve media coverage as a positive influencer |
Positive media coverage all round Matched by positive market reaction Shareholder approval influenced by this positive coverage Fully subscribed capital raisings an outcome of positive sentiment |
Straightforward and persuasive presentation of the story gained confidence of the media and the markets Nothing was hidden and the story of convergence was well accepted from simple explanations |
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OBJECTIVE |
OUTCOMES |
EVALUATION |
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To explain the advantages of convergence |
Media releases explained convergence simply and persuasively This explanation was perpetuated |
The topic was not well explained in material provided to us for research but we converted it into easily understood information, concepts and news |
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To arrange spokesperson roles within sensitivity of primary spokesperson being associated with acquirer and seller |
Creation of tripartite spokesperson function Pimary spokesperson carrying the big picture Other two spokespersons supporting positions of acquirer and company being acquired |
Process worked well with primary spokesperson outlining the bigger ideas with other two spokespersons supporting with anecdotes on individual businesses and how the big idea of convergene would work in practice |
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To be forewarned as well as forearmed |
Two issues arose which we managed: Pre-transaction coverage in The Newcastle Herald indicating an unlikely direction for the two businesses, resulting in us arranging special one-on-one contact for explaining the transaction personally to the paper Early warning alert to a government inquiry into a tender won by SPT, with SPT handling this with personal diplomacy |
Our media monitoring and interpretation of responses defused what might have been derailing events |
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To present the transaction as a natural outcome and direction for the two companies |
News releases were drafted in a way which presented the news interestingly without overdoing the drama to ensure the transaction was perceived as a natural progression |
Straightforwardness of presentation was reflected in media reporting and market interpretation |
CONCLUSION
It is not always the case one can see a direct connection between communications management and a successful financial transaction since many factors impinge on a positive outcome.
However, pre-transaction concerns about how the transaction may be interpreted or interrupted by unforeseen events elevated communications to a high level of importance.
Consequently it can be reasonably claimed that management of the communications sensitivities was of the highest significance in achieving a successful business outcome.
