Integrating The Sales Force In M&A Processes
Integrating The Sales Force In M&A Processes : However, although most M&A processes seek to improve shareholder value, less than 20% achieve it (KPMG) and only 30% manage to improve pre-merger growth rates.
What Is The Role Of The Commercial Network In The Success Of An Integration?
Both managers and consultants often disproportionately emphasize the synergies of eliminating cost duplication. Elimination of duplication in customer service, general and administrative expenses and logistics integration are all critical areas in a merger. They are also faster and easier to implement than achieving revenue growth synergies.
However, according to the ZS analysis of SP500 companies, a 1% post-merger drop in sales would require cost synergies of 28% to maintain shareholder value. And a 3.5% post-merger revenue improvement would eliminate the need for cost synergies.
The reality is that the success of many mergers rests on the ability of the new organization to exploit the offer of both companies, and the client portfolios, generate cross-selling and up-selling and improve client retention. In short, the new business organization must be more productive than the previous two by their side.
However, this business productivity improvement is often the exception rather than the rule when it comes to post-merger results.
The Sales Organization Is A Complex Structure
The commercial organization is surely the most complex system of a company and on many occasions the most misunderstood. The effectiveness of the sales organization rests on 5 large variables that each bring together a complex system of sub-variables and that range from the commercial strategy itself, the organizational design, the customer management processes, the skills and abilities of the individuals, their motivation, intelligence processes, and marketing processes.
In this context, the integration of two sales forces, each with its own culture, strategy, and practices, requires an objective and balanced assessment that in many cases includes not only the sales force itself but also other adjacent areas.
The ultimate goal is for the resulting organization to be more effective at generating revenue than the previous two separately. Success factors in the integration of commercial organizations. These are, in our opinion, the practices that have made it possible to improve the integration processes of sales forces in a merger.
1. Build a solid foundation of commitment in the post-merger management team.
The existence of an integration plan that has the commitment of the management team is vital. The management team must understand the paramount importance of integrating the sales force into the overall process.
2. Adopt an investment perspective, not a cost perspective.
Conceiving the merger as an exercise in efficiency rather than pursuing greater combined effectiveness of both organizations does not help improve revenue results.
3. Proactively involve the field sales managers.
The maintenance of enthusiasm and motivation is strongly related to the behaviors that salespeople observe in their Area Managers. Incorporating Field Sales Managers into the merger process as soon as possible is key.
4. Adopt a learning and improvement orientation based on the best practices of both organizations.
The imposition of “acquiring party” practices does not help improve the combined sales result and creates a winner-loser divide. The goal is to avoid a highly destructive “Us vs. Them” environment at all costs. The team and integration must ambitiously seek to keep “the best of both worlds”.
5. Define a new business strategy that includes a new customer segmentation and a value proposition for each segment.
The analysis of the new joint customer portfolio allows different customer segmentations to be carried out, which are necessary to design a new organization with new service levels for each segment.
6. Correctly redefine the back-office processes in accordance with the new segmentation and value proposals.
The back office is the area that everyone looks at first when it comes to synergies. However, the back-office processes should be the last thing to be defined, once the structure and processes of the front office have been properly redesigned.
7. Define a new commercial structure
that satisfies the new service strategy for each segment. Identifying processes and new profiles of competencies, knowledge, and skills for each commercial figure and their new role in the organization.
8. Build territories and client portfolios in a balanced way
And in accordance with the new strategy, they minimize the effects derived from the change in trading partners.
9. Define the post-merger remuneration system as soon as possible.
Few things are more important than the definition of the new remuneration system. The new remuneration system provides a lot of information to the members of the network, in a situation where uncertainty is not advisable. In the absence of decisive decisions in this area, the best will not wait to go to other companies.
10. Identify the Gap in skills of each person.
Identify vendor segments with common needs (clusters) and define specific improvement programs.
11. Establish a current business protection plan.
That ensures that what really matters is not lost during the transition.
12. Work fast.
The longer the transition lasts, the more possibility of confusion and the more uncertainty we will generate in the organization.
13. Establish a retention plan for the best.
In merger processes, there is a real risk of losing talent. Establishing a retention plan for those people who have consistently shown better performance is key to avoiding brain drain.