Part one of this three-part series looked at Capturing Post-Merger Value from Commercial Integration. Part two analyzed revenue synergies.
The way you execute the merger integration work is critical to its acceptance by the organizations and the deal’s ultimate success. We believe that there are three things that companies should do to guarantee a successful post-merger integration (PMI) process:
- Ensure the investment thesis drives the new go-to-market (GTM) model.
- Leverage a program management office (PMO) approach and a structured integration process.
- Follow important guiding principles in managing the PMI.
Ensure the investment thesis drives the new GTM model. Rather than just working through how to put two organizations together, one should start from the investment thesis and ensure the new GTM model is designed to capture those intended benefits. With a clear view of commercial objectives, a post-merger integration allows an organization to build the required future competitive commercial engine from the “piece parts” of seller and buyer. It is also a great time to assess the entire GTM model and address issues that would otherwise be more difficult to tackle. At a minimum, the following areas need consideration:
- Organizational structure. This is the fundamental alignment of organizational units to drive commercial performance in the market. There is a range of choices – by customer segments, products/services, verticals, and geography. In the abstract, there is no one right answer. The ideal choice or choices focus on how to best leverage the inherent organizational capabilities and competitive advantages to maximize the sale of products and services to the target customer segments. Many organizations end up with some form of a hybrid model.
- Sales roles and role definitions. This is the core of the GTM model, identifying which roles will be used to drive which offerings to which customers. This requires reviewing and updating roles to provide clear responsibilities and accountabilities. This is especially important if the two companies had similar but slightly different historical roles.
- Coverage model. Once the GTM structure and roles are clear, one can address the optimal coverage (number of various roles needed based upon business objectives). The coverage model should be designed so that the lowest cost role is used where possible to produce an efficient compensation cost of sales.
- Sales process. The summary of how the sales team should execute the sales activities is typically captured in a playbook (the “what” and “how”). The associated pipeline system summarizes the activities which are the leading indicators of future commercial success.
- Sales cadence and coaching. Sales cadence is the pattern of repeating activities and interactions between front-line sellers and first-level managers or coaches and sales management. The cadence is typically documented as the weekly, monthly, and quarterly activities that should be conducted. Coaching is extremely critical and the first-line managers are central to driving an aggressive and successful cadence. Coaching and cadence are typically two of the most important levers that can be pulled to raise sales performance.
- Sales Ops. Sales operations is the foundation for executing and implementing most of the new integrated sales model. Ensure you have the right capabilities and resources.
- Reporting. Central to an effective commercial engine are the metrics and reporting systems that allow participants and business leaders to assess performance. Ideally, the reporting should reinforce the cadence efforts and help drive business.
- Motivation and compensation. Compensation is key, especially if there is a significant shift for one or both organizations. But it’s also important to look beyond compensation. Motivation comes in many forms (e.g., recognition, celebrating success, non-financial rewards, appreciation) and these can be important levers for change as well.
Leverage a program management office approach and structured process to manage the PMI. Successful post-merger integrations typically employ a PMO structure and a structured process to ensure the work progresses smartly.
Promote transparency and fairness. Make sure key issues are addressed and resolved in daylight – not in the dark corners of back rooms.
- Use the PMO to ensure clear roles and coordination across the PMI. A typical structure includes a steering committee, a PMO office, and area or issue teams that do the heavy lifting for key integration topics.
- Follow a structured process to ensure consistency and rigor. A typical process includes integration team charters that define and launch teams with clear scope, boundary conditions, deliverables, and regular review meetings to ensure smooth progress.
- Track growth and value creation metrics. it is important to track progress in integration milestones, but it is just as important to implement metrics to track progress against the growth-related objectives of the merger. This should be done immediately after close to ensure the commercial organization keeps its eye on the ball.
- Keep the teams focused on selling. Remove obstacles that consume mindshare and distract the sales teams.
Follow guiding principles in managing the PMI. Following simple guiding principles in managing the PMI will increase the likelihood of successful value creation.
- Staff the PMI with top performers from both sides and bring the integration teams together. Working together will build important connections. Sometimes the final tweaks to the design and model are less important than the fact that the team did it together. Formal and informal interactions are important to build awareness and understanding of alternate views.
- Use a best-of-both-worlds approach. Selection of the new processes, systems, and people should be solely driven by a vision for the most productive new environment, leveraging the merger as an opportunity to shift the sales function to a more company-driven sales model vs. a self-driven model. It should be about getting the right talent in the new roles. It should not be: (1) a bolt-on of the new organization to the acquirer’s systems and processes or vice versa, (2) the simplistic result of a political negotiation, e.g., one box on the org chart filled with a person from company A, the next from company B, or (3) giving people positions, regardless of the talent needs, just because they need a job in the new organization.
- Identify champions and change agents. You will need both. Don’t count on luck, find and nurture key individuals including champions at several levels and change-agents throughout. Find the people that others will “follow into battle” and win their hearts and minds. The best way to do this is to involve them in the integration.
- Promote transparency and fairness. Make sure key issues are addressed and resolved in daylight – not in the dark corners of back rooms. Make logical decisions based upon facts and reason where possible. Make sure every issue gets a fair hearing. This doesn’t mean the world is a democracy and everyone gets to vote on everything. Everyone may not like every final decision but if they feel the issues were dealt with fairly, that will help build buy-in.
- Use pilots to test and refine important adjustments prior to rolling out. Every launch is bound to encounter unexpected issues, due to various reasons, including known and unknown unknowns. The best way to avoid larger issues is to define limited pilots to test and fix any issues that arise before a full rollout.
- Invest time and energy. Successful integrations require personal dedication and commitment. The PMI leader or leaders need to be visibly driving and managing the efforts and checking on all the spinning plates.
- Over-communicate constantly. You have to repeat the messages multiple times for them to sink in. Use the personal touch across multiple forums.
- Celebrate progress and successes. Take the time to recognize and reward individuals and teams who have helped make the integration process work. Don’t underestimate the value of a simple thank you.
Bulend Corbacioglu is managing director, Germany, of Blue Ridge Partners. Bulend has been helping serial acquirers build value through acquisition and integration activities for 20 years. Kevin Mulloy is Blue Ridge’s managing director, U.S., with a focus on innovation and technology management.