Include these 3 actions in your overall integration plan and you will significantly increase the probability that your transaction will drive the expected level of value creation. Avoid being another tombstone in the failed M&A graveyard.

Mergers, Bolt-ons, and tuck-in acquisitions are an increasing common growth strategy being deployed by Private Equity firms today.

 

Multiple Arbitrage can be a very efficient way to increase enterprise value, however, it is also fraught with peril and littered with the tombstones of well-intentioned deals that were dead on arrival.

 

We will tackle this challenge by providing 3 actions you can take to significantly increase the probability your deal will be a success.

 

Download our Commercial Integration Solutions Tool to Receive aid in establishing Go-To-Market Success, as well as guidance navigating the transition from Current-State Business Model Strategic Planning Activities to End-State Model Tactical Enablement.

 

Does Your Portfolio Company Have the Right GoToMarket Strategy to Support M&A?

 

M&A is a core tenant of PE firms but getting it right is quite challenging even for the most experienced firms. One of the largest contributors to this failure is the lack of planning around the new entity’s GoToMarket strategy.

 

Often the key commercial questions don’t get asked. For instance:

 

  • How will the sales forces work together?

     

  • What is the right new coverage model? 

     

  • What is the impact on customer experience?

     

  • How will the merged entity retain our top customers and sales reps?

     

  • Did you do a Dyssynergy analysis to ensure you don’t double count customers/partners/users?

     

  • How do you tackle the cultural differences between our sales organizations?

     

Too often these and other tough questions get swept under the rug based on the bare financials and fiscal logic of the deal. The acquirer believes that the answers can best be found by the newly anointed head of sales or CRO to figure out on their own.  The truth is, sometimes they can, but too often the answers come at the expense of the investment hypothesis.

 

This occurs because valuable time and momentum is wasted as the executive teams try to work through these issues without one of the foundational elements needed to drive decision making: good data.

 

Does this sound like a familiar outcome?:

 

  1. Top clients leave

     

  2. Top sales reps leave

     

  3. Cross-sell/upsell opportunities don’t materialize

     

  4. New product launches fail to meet expectations

     

What was supposed to be a $200 million acquisition (to add  $100 million in top line and $20 million to the bottom) is now $50 million & $10 million.

 

Instead of paying 10x to acquire EBITDA worth 14x you’ve spent 20x. Not a great return on invested capital, and yet it continues to occur on a regular basis.

 

A Little Bit of Commercial Planning Can Go a Long Way

 

So here is what you can do to sidestep these issues as you evaluate your next bolt-on or tuck-in candidate:

 

  1. Build a one page Sales and marketing operating plan

     

     Define the goals and objectives of the new organization. Leverage a RACI  diagram to ensure all key players understand their responsibilities and accountabilities. Ensure there is alignment across the product, marketing, and sales organizations.

     

  2. Complete a Cross-sell Analysis

     

     Often the future cross-selling opportunity is part of the justification for the deal but rarely is there any quantitative rigor applied to this assumption.   You should do a product-based cross sell analysis with Use Cases that verify if the cross-sell desire is substantiated by the complimentary value of the now combined offering. This can be done leveraging a number of techniques without alerting the market.

     

  3. Manage the Customer Experience

     

    Understanding what your expanded customer base cares about, how they want to buy from you, and who they want to interact with is critical. Too often M&A is done in a vacuum without understanding customer and market preference. Have a well thought out communication plan in place to get out in front of potential issues. Complete a touchpoint analysis to understand all the ways your brand is interacting with your customers and prospects. Marketing should be actively involved in the messaging and providing the sales organization the enablement they will need. Failure to do so will impact customer retention. When customers leave they are often followed out the door by your top sales performers.

     

Include the above 3 actions in your overall integration plan and you will significantly increase the probability that your transaction will drive the expected level of value creation. Avoid being another tombstone in the failed M&A graveyard.

 

Download our Commercial Integration Solutions Tool to Receive aid in establishing Go-To-Market Success, as well as guidance navigating the transition from Current-State Business Model Strategic Planning Activities to End-State Model Tactical Enablement.

 

 

Additional Resources

 

Schedule a working session at SBI’s Studio. 

 

Located in Dallas, TX, our facility offers state-of-the-art meeting rooms, lounge, full-service bar, and a studio used to tape our TV shows. SBI provides the location and facilitators, all at a compelling price point.

 

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ABOUT THE AUTHOR

Tim Foster

Tim empowers private equity firms and their portfolio companies to leverage emerging best practices across the investment life cycle. Tim works clients from early stage due diligence, 100 day plans, post close value creation and exits.

Prior to joining SBI Tim spent the past decade in Private Equity working with B2B companies across various industries.   Earlier in his career he held various account executive and sales management roles in technology and services businesses including Lanier, SAP, and GS1.    Because of this, Tim can assess a situation through the eyes of an investor and a practitioner. Tim leverages this unique combination of experience to help private equity firms and their portfolio companies outperform their peers.

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