© 2003 Jonathan Bernstein
Estimated Readership: 10,000+
JUST A THOUGHT
Why is it surprising that most organizations haven't engaged in crisis preparedness, when most of us haven't checked the batteries on our smoke detectors recently or stocked up on emergency supplies for use in case of earthquake/flood/tornado, etc.?
CRISIS MANAGEMENT & THE LAW
The Role of Crisis Management In Pre-Investment/Acquisition Due Diligence
by Jonathan Bernstein
DUE DILIGENCE: "The process of investigation, performed by investors, into the details of a potential investment, such as an examination of operations and management and the verification of material facts." (Source: InvestorWords.com)
The title of this article may surprise some readers. What possible role, you might ask, can crisis management play in the complex interaction between potential investors or buyers and the organizations that are the focus of their due diligence investigations?
In my experience, those who are in "acquisition mode" -- be they venture capitalists, expanding companies, individual or group investors -- do not garner certain types of information that could be critical to making and protecting their investment or purchase. For this article, I'm referring to buyers, those who are actually acquiring a business, and investors making significant investments.
The traditional due diligence process usually involves some formal background checking, discussions with references, and probably a thorough Internet search. What it often doesn't give buyers/investors is information critical to (a) the reputations of all involved in the potential transaction and (b) the potential acquisition/investment target's ability to prevent and survive crises. EVERY organization is going to have crises; if they can prevent some, and get through others quickly and effectively, then the acquisition/investment will be far better protected.
Here are some of the categories of information that can be provided via a combination of techniques generally associated with (a) a crisis management vulnerability audit and (b) investigative journalism.
To the extent the situation permits, in an often-sensitive pre-acquisition/investment environment, stakeholders are contacted directly. But there are also many indirect sources of published/public record information that can be identified through comprehensive, Internet-based research (requiring a high level of expertise, not simply a "Google search"), as well as indirect sources of information on the opinions and beliefs of stakeholders. Collected and analyzed, they can provide investors with a sometimes eye-opening glimpse at challenges and opportunities they would not capture through traditional due diligence examinations.
- What reputation does the acquisition/investment target have with all its stakeholders, internal and external? How does that compare with what the company says about itself? Stakeholders would include everyone from employees to customers, from board members to journalists.
- For acquisitions, what reputation does the acquirer have with its stakeholders and with the stakeholders of the acquisition target? That reputation will very much impact the reaction of all stakeholders to news of a possible or actual acquisition.
- How are all stakeholders affected by the acquisition or major investment going to react to it? Positively? Negatively? What can be done in advance -- understanding that news of the such transactions cannot be released until appropriate -- to optimize all stakeholders' response to the news?
- Has the acquisition/investment target done any crisis preparedness -- vulnerability assessment, planning and training -- that would allow it to better survive inevitable crises? Not just its ability to manage any distress caused by the initial business transaction, but the business' ability to survive all crises to which it is vulnerable? If any reader has not previously received a copy of my free "Crisis Preparedness Checklist," request it by email to email@example.com. It will prove useful for a quick preliminary evaluation of any organization's readiness for crises.
I've had the opportunity to work with attorney Mike Lappin, a partner at Quarles & Brady LLP (http://www.quarles.com) specializing in mergers and acquisitions, on a couple of transactions of this type. We both found that combining legal and crisis management capabilities has brought substantial added value to the entire transaction, from due diligence to "done deal." Mike had this to say about due diligence:
"Due diligence investigations often focus on financial and legal matters as a buyer attempts to rather quickly understand the target's business and evaluate the possible risks and rewards from the transaction. However, other factors, such as how the buyer is perceived by the target's employees or how prepared the target is to deal with unexpected events, can have a significant effect on whether a transaction is a success, and these factors often do not receive the same attention in the due diligence process."
In the new world of corporate governance regulations and general distrust of investment-related wheeling and dealing, buyers and investors can't afford to be without ALL possible critical intelligence. Using crisis management tactics pre-investment or pre-acquisition can provide that information.
Editor's Note: This is one of periodic series of articles featuring both PR and legal perspectives on an important issue.
CRISIS MANAGER BUSINESS ANNOUNCEMENTS
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CRISIS MANAGER UNIVERSITY
Editor's Note: Crisis Manager University started as a column in this newsletter but is now also a website, http://www.crisismanageruniversity.com, dedicated to the ongoing exchange of information and opinion on crisis management-related topics. Readers are encouraged to join the free but "restricted to members only" site by going to the URL above. Then start your own discussion "thread" on any relevant topic, to include those introduced by this ezine.
Kobe Bryant Makes An "I Am Not a Crook" Mistake
The text of the initial statement released on behalf of Kobe Bryant through his attorneys and agent included the following classic mistakes, reminiscent of Richard Nixon's infamous "I am not a crook" comment.
"I am innocent of the charges filed today. I did not assault the woman who is accusing me."
[He could simply have said "I am innocent of the charges filed today." That implies that he did not commit assault without repeating the allegation.]
"Nothing that happened June 30th was against the will of the woman who now falsely accuses me.
[He could have said "What happened on June 30th was voluntary on both our parts."]
Lessons for crisis managers:
- Reiterating allegations in the context of denying them further reinforces public memory of the wrongdoing being alleged.
- The overall strategy that the "Bryant Team" is taking is, with these errors aside, very smart if he's innocent, and very dumb if he's guilty. Making categorical denials of innocence in the court of public opinion -- if those denials are later proven false -- ultimately cause more harm than saying nothing or saying very little when allegations first surface. Bill Clinton and Scott Peterson have proven that, amongst others.
- Having a "cushion" of goodwill and credibility is invaluable when crises do occur. Clearly Kobe has such a cushion and is largely being given a fair shake by the media (and, it appears, by most fans). Organizations and individuals need to consciously do the proactive PR necessary to developing such a buffer to protect them in times of crisis.
The Media Needs Media Training Too
The infamous "Bimbo Awards" from crisis management consultant Merrie Spaeth recently highlighted the comments of a Time Magazine editor. He was responding to criticism about closure of the publication's Mexico City office, saying, "I would not characterize it as a cynical, screw-Latin America-type decision." He followed that up with "We have not abandoned the region."
Lessons for crisis managers:
- EVERYONE who speaks to the media on behalf of an organization needs to be media trained. The fact that one has experience in PR or journalism does NOT make one an effective spokesperson. It's a specialized skill requiring specialized training. Some are naturally better at it than others, but all need training - and practice.
- Don't introduce allegations in the context of explaining yourself!
- Don't give an interview when you're feeling frustrated, unless you are very skilled at setting aside your feelings.
- Script your key messages before giving important interviews. If they're by phone, you can just read from the script. If the interview is going to be in-person, memorize them.
PLAIN ENGLISH DISCLOSURE
Bernstein Crisis Management has formal or informal co-promotional and mutually beneficial business associations with PIER Systems, Inc., PR Newswire's ProfNet service, MarketingSherpa.com, The Publicity Hound, CustomScoop, and the Disaster Recovery Yellow Pages. No, we can't go into details because that's confidential, proprietary, etc. But our relationship is NOT "arm's distance" and you should know that, since we regularly write about these services as we use them for crisis and issues management or other purposes. That said, you should also know that Bernstein Crisis Management sought the relationships because its staff is convinced that these services are the best of their kind for Bernstein Crisis Management's needs and those of their clients. If you have any questions about these relationships, please contact Jonathan Bernstein, (626) 825-3838.
ABOUT THE STAFF
Jonathan Bernstein is president & CEO of Bernstein Crisis Management, Inc., a national crisis management public relations agency providing 24/7 access to crisis response professionals. BCM engages in the full spectrum of crisis management services: crisis prevention, response, planning, training and simulations. He has been in the public relations field since 1982, following five-year stints in both military intelligence and investigative reporting. Write to firstname.lastname@example.org.
There are a number of organizations whose services we admire enough to have pursued closer ties with them -- and to let you know about them, too, on the Allied Services page of our website. If you have a moment, we think it will be worth your while to browse the sites listed there.
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