When M&A news goes wrong for employees

The end came swiftly at Sierra Pacific Mortgage, especially how the news of the company's sale was delivered to employees.

Following the agreement to sell the business to Union Home Mortgage, affected employees were addressed by Jim Coffrini, president and CEO in a brief on-line call. That call did not allow for questions, which further dismayed employees, numerous LinkedIn postings noted.

The perfect way to deliver bad news, especially on a company-wide basis, might not ever come into being. But several incidents in the mortgage industry over the years have highlighted the need for better communications. 

Past examples of poor communication in difficult circumstances

For example, the Dec. 9, 2006 What We're Hearing column on the National Mortgage News website published several days after Ownit's sudden closing claimed Bill Dallas, the company's founder, was out making speeches rather than being onsite to discuss the situation. In another example, at Sebring Capital on Nov. 30, 2006 denied it was closing but shut the next day.

A much more recent infamous example took place on Dec. 1, 2021, when Better laid off 900 staffers.
It was how the message was delivered that ended up being the problem, which made waves beyond the mortgage industry. The Zoom call became social and mass media fodder, causing an exodus of some leaders from the company. But CEO Vishal Garg, who had to temporarily step back from leadership at a time when the company was preparing to go public, also apologized for what happened. 

The online meeting at Sierra Pacific

What got many upset about the Sierra Pacific call was the lack of empathy Coffrini displayed.

Over the years Coffrini talked about the "Sierra Family" in a way which many employees bought into, and the four-minute call destroyed that reputation, many LinkedIn posters commented. Then the call ended abruptly, without taking any questions, although later reports emerged that follow up calls did take place.

(An attempt was made to reach out to Coffrini.)

An observer compared this with former Academy Mortgage CEO Adam Kessler, who sold the company to Guild in February 2024.

A National Mortgage News story on the sale noted the financial and legal pressures Academy was under at the time.

Academy offered severance and on the call, Kessler reportedly stayed until all the questions were answered.

What might have been going on behind the scenes

In these situations, some observers note the deliverer of the message might have been under some unknown pressure.

Eric Levin, executive vice president of client development at business development platform Model Match, looked at what the management side of the table might have been dealing with. 

"I don't think any of us can claim to know what was happening in the weeks or months leading up to an agreement that created the template for this acquisition, and then what mistakes might have been made in the planning seemed small at the time, that ended up being something much bigger than small," Levin said.

People "should take a breath," he continued, and realize owners of these companies leave "their blood, sweat and tears," along with their financial means on the table and assume the risk of ownership. At some point they may be ready to do something else or unwind, and they've earned the right to do that, Levin said.

Blackfin Group President and CEO Keith Kemph agrees.

"Undoubtedly CEOs in our industry have been under a lot of pressure the last three years," Kemph said. "Let's face it, the gradual, slow, industry disintegration has been nothing short of daunting."

Business owners have been fighting to keep the lights on, the bills paid and staff employed, while at the same time keeping an eye on the primary function, which is making sure they are able to help consumers get into a home with their products.

"I can see why some CEOs just brake and completely blow chunks delivering the news about a significant, seismic, corporate change that will impact everyone involved," Kemph said.

Not every deal ends badly. Levin cited feedback he heard around the Rocket–Mr. Cooper integration, which was largely positive despite a reduction in force.

"There's people that did lose their jobs, but they got very clear communication, a very clear understanding of why this was happening, and a very clear path on what was next for them, whether that was severance or otherwise, including placement services, potentially," Levin said. 

"So you walk away from that acquisition not having hurt people's feelings or made them mad at you, but at least they can walk away with an understanding of why we're in this situation, what can I expect next, and at least some level of perception of fairness."

But in the Union Home-Sierra Pacific deal, some of the simple things were not handled very well and this is what made the situation louder than it had to be, Levin said.

Over the past three years Kemph has been advising company owners to get off of the proverbial ledge as they faced that profit and loss crisis, which in some cases ended up with them in a deal and having to make that announcement to affected employees.

A checklist for delivering difficult news to employees

Kemph offered some advice for executives to help them structure delivering the news:

"First, get your ego out of the way. Second, be at peace with the business decision as you know you did everything you could.

"Next, take a pause. Get some sleep, even if it's an hour nap in the office. Do not deliver any significant news right after a business decision is made and never do it unscripted," he noted.

His final point of advice was on how to script the message:

• Choose your words carefully; if you don't, it could hurt your long-term image and legacy.
• These are loyal people with families; be sensitive, be empathetic and be truthful about the situation.
• Start with thank yous for all they've done then just deliver the bottom-line announcement.
• Now, tell the story of the battle that led up to this decision/moment. Be honest. Provide color without too much detail, let them feel the painful journey which reached this point, and how you fought like hell to avoid having to make a difficult business decision.
• Be contrite, remind them to be proud of accomplishments, express thankfulness, and appreciation.
• Now, explain that good things can come out of every bad. Set their sights on the three major positives from this decision for them personally, professionally and corporately.
• Next, clearly set expectations for the days and weeks ahead. Even if it's not clear or there are still other un-answered questions everyone is craving. Let them know how you will share as soon as you can.
• Remind them you have an open door, and human resources is available, if they have more questions.
• Then, provide them both time and space to digest the news individually for a day or so, and let them plan accordingly.

Being a leader isn't easy and having to make those decisions which impact a whole company is hard.
"However, as a leader you have a responsibility to effectively plan and gently communicate significant changes," Kemph said. "As a leader you need to remember, these people trusted you to join (or stay) at your firm, they deserve to be treated respectfully and provided dignity, support, guidance and empathy when delivering news."

An executive's primary job is to position and champion their employees for greater success, even if they end up starting a new chapter elsewhere.

"If you don't, your 10-, 20-year legacy will come crashing down in minutes," Kemph warned. "We are a people industry. We care about our most valuable assets, our people."