Mergers and acquisitions hold promise for owners and investors of combinatorial synergies to reduce costs, increase profit, extend market and product coverage, as well as accelerate innovation.
According to the Bloomberg 2012 M&A Outlook, more than 24,700 deals were conducted globally in the year to end November 2011. However, mergers come with a great deal of risk as reflected in failure rates that are reported to be between 40% and 70%. Despite best-laid plans and executive oversight, human factors present the greatest risk and sales-force integration is the toughest merger issue to overcome.
1+1 does not equal 3
In the B2B technology market we have all seen optimistic mergers and acquisitions struggle to achieve projections and prove a lie to the 1+1=3 equation that drove much of the pre-merger thinking. In many cases, the merger actually destroys shareholder value, where 1+1 is less than 2.
In an excellent article published in the McKinsey Quarterly, the author identifies four essential steps to facilitate successful sales operations integration:-
- Sharing information about the merger and integration process with customers and the salesforce, (overcommunicate)
- Build early sales momentum, (focus on quick wins)
- Look beyond retaining sales reps, (consultants are important too)
- Review your customer portfolio, (re-allocate resources to most promising customers)
My article seeks to explore several of the high risk factors in any merger;
- Positioning the new merged entity in a way that is engaging and builds confidence in employees and customers,
- Getting the combined sales teams productive and marching to the same tune,
Many post-merger business plans are based on pro-actively cross-selling for the 90-180 day period after the deal closes to generate quick-wins and build confidence and momentum, both internally and in the market; where company A’s sales team is tasked with positioning their own products as well as cross-selling company B’s products into their installed accounts and vice-versa.
However in conversation with sales and marketing leaders in several merged companies in recent months, despite intensive product and sales training and incentives, the merged sales teams have failed to produce forecast results.
In one company I spoke with the VP of product management; company A products are a market-leader and sales are growing as forecast, yet company B’s products which were fast emerging in different market niche have few leads and fewer sales and heads are beginning to roll.
On closer examination it became clear that there were two key contributing factors that had been glossed over in the pre-merger plans.
1. Product maturity mismatch
2. Selling skill mismatch.
Product Maturity Mismatch
Company A is a market-leader, much of the new business growth comes from referrals and its business is growing at 30% per year. A buyer of company A’s products is a pragmatic early-majority buyer, the buying category is mainstream, company A has a well-established brand and is considered a safe bet.
Overcoming the Post Merger Sales Revenue Challenge
Company B however is smaller and fast growing in an emerging market category. Its salespeople are technical and their presentation style hands-on and demonstration-led. Several of their sales stars jumped ship in the first months after the merger, (another big risk in any merger is the top sales and pre-sales stars leaving).
After one year, company A’s traditional customers still view company B’s products as interesting, but risky. The combined sales team struggles with positioning company B’s products in a presentation and demonstration led sales cycle that takes between 60-90 minutes and is heavily PowerPoint oriented.
Selling Skill Mismatch
Company A has a mature product and its buyers engage sales people in a value-added way at the business case or transaction-end of the buy cycle after they have determined needs and are ready to configure and buy the software.
Company B’s products are still crossing the chasm to the early majority. Early adopters see the potential in the products to get a leap on the competitors and are prepared to engage salespeople earlier in a conversation of possibilities. In retrospect, salespeople in company B behaved more like technical consultants than “gung-ho” salespeople and invested lots of time and technical effort to help buyers to understand the risks in their approach as well as the upside.
This by definition is Value-Created Selling, where the insight of the consultants created momentum for change and shaped the buying experience. They were successful in winning pilots and set the agenda for the eventual purchase, however sales cycle times were 12-18 months.
Fans of The Challenger Sale will see an obvious parallel in approaches.
Action Plan for Post-Merger Success:
Human factors far outweigh technology risks in M&A activity. Sales people will not position new products when they lack confidence and are uncomfortable in doing so…they will contnue to position what they know and try to make their numbers selling their familiar product portfolio.
Traditional approaches to sales training in the form of a PowerPoint whipping from product management and a sales portal stuffed full of promotional material will not help to reduce sales ramp-times in post-merger situations any faster than with new hires in existing companies.
Overcoming the Post Merger Sales Revenue Challenge
Sales enablement programs should begin by clarifying the value in the combined company offerings and the value-creation message.
Salespeople need to be able to tell a convincing story starting with the WHY and the values and vision that drives the combined entity and how that manifests in value to the customer. This is the “Why?” in the Simon Sinek video.
Traditional product training doesn’t work. Post-merger sales enablement needs classroom immersion and spaced repetition post-classroom, combined with sales management coaching, reinforcement and certification.
One approach that has been proven in getting rapid message ownership in salespeople is visual storytelling. Visual storytelling is also extremely effective in helping salespeople to communicate their “big idea” quickly using visual confections when in front of buyers.
Hands on role-playing and repetition using actual prospective customer situations as well as storytelling skill development will enable salespeople to exit the training room with the confidence to engage buyers and exercise their new skills.
Post training reinforcement, coaching and competency certification will drive behavior change to help achieve sales integration and revenue targets.
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