The making of a merger - merger between Nortel and Bay Networks

Creating a web site with the latest information on the integration of the two companies was one means of increasing familiarity between the two populations

When two companies sign a merger contract, despite the long hours of negotiation, the easiest part of the interaction has been completed. From that point on, the period of greatest danger begins. The two organizations must begin to adapt to each other with a shared goal of cooperation and ultimate unification. All too frequently, however, promising mergers come apart at this point.

Nortel and Bay Networks announced plans to merge on June 15, 1998. On August 31, the contract was signed and the two companies began operating as one. The first joint sales call was made on the day the merger was accomplished (the call resulted in a sale). Since then, many outside observers as well as the company's own employees have remarked that the integration of the two companies has gone smoothly.

What did Nortel Networks do to make the merger of the two organizations successful? Let's look at what happened during those 75 days between the announcement and completion of the merger.

Integration Teams

When the agreement to merge was announced June 15, the two companies quickly established a series of joint teams to address areas where the two needed to integrate their operations. These areas included marketing, operations, finance, accounting, compensation and benefits, and, in particular, employee communication and information systems.

Executive management felt these last two areas were of special importance. Both corporations were highly reliant on electronic communication, so it was critical that the two networks mesh as soon as the merger was completed. Employee communication was equally important because of the need to "re-recruit" employees from Nortel and Bay into the new company, Nortel Networks. Accordingly, communication between the two organizations began almost immediately after the initial announcement.

The employee communication and information services integration teams were the first joint employee teams to come together. With little precedent to guide them, the teams put all the "channels" available to employees to work, merged some, created new ones and planned one of the largest employee events in Nortel Networks' history.

Cultural Concerns

The importance of initiating communication between the two employee populations was not an idle concern. Many outside observers were quick to point out the perceived differences in the two corporate cultures and to predict assimilation problems. Bay was perceived as a typical laid-back Silicon Valley corporation, whereas Nortel was felt to be a more staid and formal Canadian corporation. Analysts pointed out other mergers that had come apart because of cultural differences and wondered if a similar fate was destined for this one.

To allay these concerns, the employee communication team felt it had to fill the information vacuum and try to dispel doubts and mistrust. The first task was to help employees understand the merger and the new corporate direction. Through July and August the team members from Nortel and Bay Networks kept up a steady stream of communication on progress of the merger.

First, the team decided to establish "mirror" web sites on both companies' intranets to enable employees from both companies to have information simultaneously. As developments occurred, announcements were made and external comments were reported, the teams captured these and posted them to both web sites, thus keeping both sets of employees informed.

Next, a secure site for all Bay and Nortel managers was established to equip the managers with up-to-the-minute information on hiring, compensation, service agreements, etc., needed to merge their teams.

Simultaneously, other team members were addressing the cultural issues. Two brochures - "An Introduction to Nortel," created for Bay employees, and "Introduction to Bay," for Nortel employees - were designed and written in days and distributed to 80,000 employees. At the same time, the team responsible for Nortel World, the Nortel employee newspaper, worked around the clock to deliver news of the merger after the June Nortel World had already gone to production. Subsequent months' editions carried extensive coverage throughout the summer. Likewise, both Newsweb, Nortel's intranet news service, and BayWeb, Newsweb's equivalent at Bay, delivered daily and sometimes more frequent coverage with breaking news about the merger.

Linking the Networks

To prepare for immediate information exchange once the new company became a reality, a set of information service subteams immediately began to focus on systems interface: linking the two companies' voice and data networks. The team realized, however, that interconnecting these two main systems would not be sufficient to enable true integration of Nortel and Bay. They felt that integration must be extended to critical applications running on these networks: e-mail, voice mail, seven-digit dialing, intranet linkage, domain name systems, and voice and e-mail directories. Established in late July, in six short weeks these teams managed to achieve their goal of sorting through different systems, software and hardware before Merger Day.

The teams exceeded all expectations, completely connecting all of the infrastructure and applications necessary to enable Nortel and Bay Networks employees to share information and build successful working relationships. The information service team leaders worked with the corporate integration teams to identify and document plans and processes to integrate finance, HR, supply chain management, and other key processes, along with the systems required to support those processes. Finally, the joint IS integration teams worked to identify cost saving opportunities that would result from the merger in the areas of service contracts, hardware and software licensing and carrier agreements.

Gearing for Merger Day

In early August, senior management gave the go-ahead to the team's proposal to have a major employee event to celebrate the merger. The Merger Day plan, as it came to be known, called for joint Nortel-Bay celebrations across the globe in more than 100 local sites, to be hosted by an on-site executive. The centerpiece of the celebration would be a global audio-video broadcast targeted at the entire Nortel-Bay population.

The planning for such an ambitious undertaking was complicated by a welter of antitrust and securities concerns that restricted communication and announcements. The team could not even define what was to be celebrated on September 1 until a few days before the event, when the final regulatory hurdles in the European Economic Community were cleared. Organizational changes and announcements could not be made - only kept as hypothetical working drafts.

Merger Day itself was a technological and communication feat. The CEO and the soon-to-be president made it clear that in their views this would be the most important event of the year. Employees were to come first; analysts, news media and others outside the company were secondary in this critical communication event. The reason for this emphasis: all agreed that the day would be pivotal in getting employees to commit to making the merger a success. Both employee communicators and information services people worked closely to pull together to meet the challenge. Weekly conference calls were held with more than 500 local coordinators. Six satellite uplinks were established to connect the global population visually. (Because of time zone differences, employees based in Asia had to wait until the next day to view a broadcast of a videotape of the live event.) Audio ports were established for all video downlink locations to enable questions and answers. Additional audio ports also were set up for home-based employees and those working in small or remote locations where video was not feasible. The result was the largest private audio-video broadcast ever held at that time.

Merger Day was a huge success. The technology worked flawlessly, and employees around the globe were able to see the CEO and president launch the new company and hear their fellow employees ask questions. A special video made for the presentation featured on-camera comments from employees of both organizations. Shortly after the event, every employee of the newly merged corporation received a special edition of Nortel World featuring employee photos and comments as well as commentary from external analysts, who provided perspective on the merger.

With the event over, the integration efforts continued in earnest. The best ideas, practices and programs from both companies went into the post-merger activities. Employees were given access for the first time to the instant replay of the CEO and CFO in their quarterly communication with the media and the investment markets. Focus groups and opinion surveys were conducted to provide multiple upward feedback and cross-feedback loops. A Merger Progress Report kept employees up to date on how the post-merger integration activities continued.

Lessons Learned

From the time of the initial agreement to the completion of all legal requirements, the merger between Nortel and Bay Networks was completed in 90 days. A number of outside observers have remarked on how successfully the two companies united their efforts and blended their organizations. Joint sales efforts began from day one; subsequently, the two groups that serve enterprise customers have been united.

Many factors go into influencing the success or failure of mergers. In the case of Nortel and Bay Networks, three factors appeared to be prominent in making this effort so successful. The first was the creation of the integration teams. Not only did these teams successfully deal with many factors that could help or hurt the integration of the two companies, they also created the opportunity for employees at many levels of the organization to interact with their counterparts in the other corporation. United by a common purpose and working in a familiar arena, the teams themselves became a catalyst for integration.

Second, the immediate and continuous flow of communication between the two organizations helped keep employees informed and dispel rumors. As a result, both organizations had a higher level of familiarity with each other, and the two corporate cultures did not seem nearly as foreign as originally expected.

Finally, the integration of critical networking infrastructure and applications enabled one-to-one communication to commence immediately upon consummation of the merger. Employees in both organizations were able to find each other in the same telephone and e-mail directories, and to view each other's web sites without additional steps. By making everyday interaction seamless on a personal level, the two corporations significantly enhanced the likelihood that the two organizations would truly become one.

These cross-functional teams started out in two separate companies, came together before the ink was dry on the initial announcement and quickly merged into a partnership focused on a common goal: to facilitate the merger on a people-to-people level. The requirements of the merger activities were not a part of anyone's annual objectives, budget or plan. Nevertheless, the team members simply jumped in, working with professional competence and a commitment to the importance of the outcome, and did the job.

Michael C. Brandon is director of global employee communication platforms, Nortel, Nashville, Tenn.

COPYRIGHT 1999 International Association of Business Communicators
COPYRIGHT 2004 Gale Group