Sales Fails in M&A

In acquisitions, sales can be just plain hard.

The Merger Verger was Sails series no 1conversing earlier today with a senior sales executive at a recently acquired technology service provider and the subject of post-merger sales came up. More than half a year into this deal, major sales issues were still causing trouble, down to the level of non-existent goals and undefined bonus formulae.

Hello! Who’s in charge here?

A big part of this challenge sounds like a failure of due diligence or, if known, a set of differing practical issues that got downplayed and dismissed. They shouldn’t have. Turns out that the differences were pretty fundamental… and obvious if one looked.

Here’s the landscape: The buyer and target are in parallel lines of business. There were good revenue synergies and cross-selling potentials in the deal. The companies’ reputations and statures in the marketplace were compatible.

But…

When you pealed away the layers of sales, there were major differences that could create opportunities but were way more likely – had anyone really stopped to think about it – to create problems.

At the acquirer, the average sales ticket was approximately $50,000. At the target, the average ticket was ten times that or more. At the acquirer, the sales contacts were in the purchasing department. At the target, the contacts were in the C-suite. At the acquirer, sales were basically off-the-shelf solutions drawn from one product line or another. At the target, they were almost all bespoke solutions drawing on resources across a spectrum of product lines.

How do you integrate that kind of disparate functionality? How do you compensate with any kind of consistency for sales processes that differ to such an extent? How do you avoid the resentment that could develop between the staff of the small-ticket acquirer and the big-ticket target? It’s a potential nightmare.

Sadly, The Merger Verger doesn’t have pithy, fits-all answers to these questions but he does have one: don’t wait until you’re half a year into the integration to resolve issues like this.

Summary:

God is in the details of operational due diligence. He (or she or it) is in the “hows” of business. If you are not asking “what could go wrong here?” you are aiming the gun squarely at your foot (or your head).

Any situation where there is a wide gap between how something is done at two companies has potential problems that will outweigh any potential opportunity if you don’t (1) accept and understand the differences, (2) tackle them as key value drivers or killers, and (3) do it right away.

About the Art:

“Sales Series No. 1” by photographer Onne van der Wal. Available through The Focus Galleries in Chatham, Massachusetts.

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