Chief Operating Officer Mike Hoffman Leads Business Transformation for Scaled Growth and Customer Success SBI growth†
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Accumulated demand and accelerated growth expectations are causing many CEOs to look closely at whether an acquisition is the most effective way to achieve their goals.
For companies that have built and grown on their own, the unknowns of an acquisition can be daunting. However, with a strategic investment of time in finding the right acquisition and correctly approaching the pre-merger and post-merger steps, the benefits can far outweigh the potential risks.
Minimize Risks Before Making an Acquisition
The first step is to do your go-to-market research. Create a comprehensive view of the target’s revenue engine, overall health, and the levers that will drive measurable improvement and sustainable growth. Your checklist should look like this:
• Assess the target’s go-to-market (GTM) capabilities against best practices.
• Evaluate the target’s quantitative performance in key GTM metrics against industry and peer benchmarks.
• Highlight GTM capabilities and performance gaps.
• Quantify and prioritize improvement levers (key initiatives in support of the investment thesis).
• Develop a sequential 100-day execution/value creation plan.
• Map out risks and mitigation steps.
Ensure successful integration of your recent acquisition
Deep GTM integration begins pre-close and flows through the operation of the combined entity. It has to start with dozens of considerations that are all too often overlooked. Many companies focus on driving revenue and margins rather than cost synergies. Failure to address the full range of GTM integration considerations will erode deal value and hinder long-term scalability.
To ensure that M&A fully contributes to the business, you must plan and manage the integration of GTM processes, people and technology by:
• Creating an integration strategy that is focused on the business.
• Setting up GTM functional and cross-functional integration workflows.
• Develop SSM integration plans, including timing, milestones, dependencies, risks, mitigation approaches and budgets.
• Manage end-to-end workflow execution (resources, governance, risk, communication).
• Equip entrepreneurs to transition seamlessly to ‘business-as-usual’.
In my experience, there are four common denominators for success during GTM integration:
1. Customer Retention Strategy
Acquisitions can create uncertainty among customers. When you start losing customers, the value you derive from synergies is lost through revenue churn. To ensure your retention is high, nurture customers and capture insights that help you identify areas of customer vulnerability so you can prevent customer churn by proactively creating solutions to anticipated pain points.
The information you collect should enable you to amplify the positive and identify areas ripe for cross-sell/upsell opportunities. By automating and scaling these customer success activities, you can deepen customer relationships and improve customer satisfaction and Net Promoter score.
2. Effective communication with stakeholders
An effective communication framework will align and prepare employees, customers and suppliers. It is important to create guiding principles about what to communicate and to whom, along with how and when to make each communication effective.
The first step is to choose communicators based primarily on their credibility and ability to influence the target audience. These people must be able to proactively convey clear, relevant messages. It’s important to segment the audience into groups of similar interests and waterfall messages to boost penetration within each audience (be sure to highlight only those messages within each group that are relevant to the intended audience). Ask for feedback regularly to ensure you are achieving your goal.
3. Engaging Key Employee Retention Plans
In addition to developing compensation plans for the entire pro forma workforce, certain individuals will require customized retention packages.
To effectively address these needs, you need to quickly assess and identify key talent so you can establish necessary retention plans — and proactively develop transition plans for key capabilities — as early as possible to minimize talent loss. Adjust key employee performance goals and incentives as you go along, recognizing that normal performance goals may be harder to achieve under the added stress.
4. Useful Synergy Estimates
Early integration planning and robust execution help unlock the full value of a transaction by more reliably meeting operational, revenue, cost and capital synergy targets. Ensure that your organization begins integration planning during synergy analysis and develops synergy estimates during pre-close integration planning, treating them as a core component of the overall integration program. And apply the same onboarding rigor as the operational components to maximize integration from start to finish.
Keep the combined entity buzzing
Once the integration is well underway, you can start making some changes by planning, designing and executing initiatives that will support the investment thesis. These are often linked to the points for improvement that have been identified with due care. Start on:
• Redesign of the sales/marketing/customer success organizational model.
• Segment and prioritize accounts to focus resources on the right set of growth opportunities.
• Optimize account coverage to ensure resources are allocated where they can have the most impact.
• Redesign of sales areas and compensation.
• Activating new routes to the market.
• Introduction of new, improved activation tools and processes.
Over the past two years, many companies have been reactive to the pandemic, focusing on keeping the company on track and taking steps to ensure worker safety. As a result, there are many companies — looking to capitalize on pent-up demand — eager to explore an acquisition strategy.
Running and integrating a new asset is never easy, but by following the thoughtful approach described above, you will increase your chances of finding the right match and achieving your goals. And just think, your next acquisition should go even smoother after you’ve already run the playbook.
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