Vendemore

Abstract

​Mergers rank among the most critical board level responsibilities. And yet they remain consistently notorious for delivering disappointing outcomes. It turns out that there is more to failing M&As than bad operational integration and poor cultural fit. A close and careful due diligence on the customer buying centers of both acquired and acquiring company can mean the difference between incremental cost savings and actively managed and shared growth.

Christopher Engman is the Founder of Vendemore, a global Account Based Marketing company working with 150+ Fortune 2000 companies. His team has observed key repeating patterns around M&A and, in particular, the central role of customer buying centers. The observations have, with input from Michael Eckhardt, Mark Stouse, Magnus Silfverberg, Michael Holm, Nick Toman, Mareo McCracken, Vicki Griffith, Hans Bunes, David Ratcliff, Donal Daly and Victor Antonio, been refined in this article.    

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“Boards and CEOs of companies are usually very optimistic at the 10,000m level that the merger should be easy to implement and easy to execute, though that is rarely the case.” – Michael Eckhardt (MD The Chasm Institute)

An invisible saboteur?

Mergers can be a powerful way to grow profit and market share. But for every success story, there is a tale of squandered opportunity. In 50 – 80% (Source: Wharton UPENN) of M&A (Mergers and Acquisitions) cases, the visions and objectives for both organizations remain unrealized. 

When we analyze the failures, we see that most of them are not caused by the familiar challenges of operational and cultural integration. On the contrary, enormous energy is typically expended on these internal issues, often at the expense of the focal areas that will in fact drive the envisioned outcomes.

Careful customer buying center analysis, covering both the acquired and the acquiring companies, pays handsomely in terms of merger success and growth. Too often these benefits are either assumed without question, or in the worst case, barely considered.

The outcome of this common blind spot in merger due diligence is a failure to integrate sales and marketing. 

A closer look

Operational efficiencies and financial engineering can create tremendous value. Yet, the true value of the deal will not be realized without the ability to cross-sell (both parties in the merger selling to each other’s customer base). The figures are stark and persuasive here. The probability of selling to an existing customer is 60–70%. The probability of selling to a new prospect is 5–20% (Marketing Metrics).

In a merger between large organizations, cost cutting almost always happens and is relatively straightforward to execute. But to grow market share, cross-selling needs to be embedded at the heart of the process. This is hard, and can be both complicated and painful on both sides. Done right, however, a strategic and fully integrated cross-selling and account growth programme turns a merger vision into powerful, predictable and actively managed growth.

Cross-selling and account growth - and in particular account growth planning as a whole - are rarely included in the initial merger base case value analysis, often because best case assumptions are too easily accepted. Once out of focus, it is easy to keep ignoring it. When the merger takes place, management are understandably left scrambling to create actionable plans that lead to success. 

A good cross-selling strategy minimizes initial problems, and articulates challenges and opportunities that otherwise go unrecognized.

Towards a solution

There are two common problems that inhibit successful M&A deals: lack of proper analysis and mismatched selling priorities and values.

1) Incomplete analysis of buying centers

Selling into different buying centers in the same clients without proper analysis inevitably causes problems. Correct analysis evaluates all the relevant product lines, active and potential clients and creates a matrix that aligns true potential with the executive team’s goals. 

Selling into different parts of an organization requires different skillsets, contacts and knowledge. For example, while the acquiring company might have a strong foothold with VPs and Directors within Supply Chain Management and in certain regions, it might not match that of the acquired company, in terms of the hierarchy needed to sell to the IT department. 

The misalignment typically features 4 dimensions:

• Functional Area (Marketing, Sales, HR, IT, Finance, R&D, SCM, Production etc)
• Hierarchy (CXO, VP, Director, Manager, User)
• Different divisions within the same customer
• Country/Geographical Area

  * See illustration. The buying center model for M&A (simplified): Company X Y Z have different contacts within the same company

2) Mismatched deal complexity and order value

There are three complexity levels of a deal: traditional, complex and distributed (Prosales sales complexity model). They need to be planned and accounted for, but often they are not. 

In acquisitions, the two companies generally have offerings with very different order values. For sales this understandably poses a problem. Among other factors, the different order values point to longer sales cycles and more change involved for the buyer’s side. 

This divides sales executives, even entire departments, in how they approach their own sales processes, thus making it hard to integrate with each other’s approaches. Lower order values (and non-commissioning, non-bonus products) in the acquired company tend to foster neglect by sales, as articulated by post-merger integration expert Michael Holm.

If the sales team in company A is used to making deals at $10M and their counterparts in company B are used to contractual values of $100k (a common consequence), there is a mismatch across both capability and motivation. The team from A are not incentivized to drive the sales of B. Sales people in B are often simply not equipped to sell the more complex and sophisticated offerings of A.

Planning for success

Ideally, before making new acquisitions, you should apply the buying center mapping matrix above. 

Even in already completed M&A cases, there are actionable steps to take to increase your chances for success. They balance a pragmatic approach to human resource allocation and incentives, with the use of new marketing and sales technologies that enable both the optimization of current buying center engagements, and the opening of fresh channels of new business.

In order to cross-sell into different buying centers, acquirers should consider the following:

1. The best customers. Start the cross-selling inside your own or the acquired company’s best customers. Take the top 10 accounts and immediately ensure that they truly understand the additional offerings in order to get onboard fast. This focuses the work on only a few account teams and the most valuable customers. The top accounts are run by the top sales people, and this early win generates tremendous value as an internal reference for other sales teams when growing the cross-selling initiative. 
2. Account-Based Marketing to influence other buying centers. ABM is particularly valuable in lifting marketing and sales activities, in cases where functional areas, deal value/complexity, hierarchy, and geography were not taken into consideration in the initial M&A analysis. It is now used by the majority of the world’s largest B2B companies, as a marketing tactic especially suited to driving cross-selling to the largest customer organizations. It exposes key employees in a customer to videos, articles and reference cases from the selling organization across more than a million online publications.
3. Sharpest people on the acquired products and services. It is too easy to keep your top sales people on the existing high revenue generators. Make sure that they are focused on the newly acquired products and services by offering more aggressive incentives and organizational adaptions.
4. Enterprise social selling. Use social selling to engage with the full range of buying centers inside each customer organization. High activity in LinkedIn using “bee swarming” techniques has proven especially effective. (Enterprise social selling)

Conclusions

So often, M&A starts with a form of corporate “love at first sight” and ends – more often with a whimper than a bang — in quiet disappointment. And then on to the next one.

We have pointed above to the entirely logical imperative of focusing hard beyond where the efficiencies lie. Having achieved those efficiencies with relative ease—and perhaps in doing so released valuable funds and other resources for growth—then failing to envision the enormous sales benefits that will drive the long term growth of the merged business, must surely become a thing of the past. Do the buying center analysis in every M&A-case including in already executed M&A cases.