M&A-Driven Sales & Marketing Know Where to Play and How To

M&A Making the Deal Work | Sales & Marketing

M&A-driven sales & marketing Know where to play and how to win

Introduction In most cases, achieving M&A-related A company’s Sales & Marketing organization A company pursuing an M&A transaction growth becomes a question of focus, can play an essential role in helping to often has a strong growth rationale for capability, and executional readiness. capitalize on growth opportunities across the deal. In theory, M&A provides many However, in their haste to integrate the pre-deal and post-deal phases of an opportunities for growth – expanded operations and reap “tangible” cost M&A transaction. This is particularly true market presence, larger customer base, synergies, companies often miss when company executives are aligned to and broader product/service portfolio, opportunities to become more customer- and guided by a Sales & Marketing growth among others. In reality, only 27 percent centric, achieve quick-win revenue framework (Figure 1) – that aids decision- of acquisitions are able to help a company synergies, and build a long-term growth making around “where to play” and “how to grow faster than its historical rate or keep platform. Many factors can divert an win.” This framework should help executives pace with its peers.1 organization’s focus from achieving growth identify and validate growth opportunities; goals including different management tie these to the newly combined company’s visions, disparate operating models built on go-to-market strategy to strengthen legacy systems and processes, outdated customer-related functions; and facilitate customer experiences that don’t leverage functional readiness across the enterprise. digital or other technologies, and culturally diverse workforces.

Figure 1. Growth in M&A framework

What management What are our goals Where will we play? How will we win? How to configure? processes and and aspirations? systems? • Confirm growth • Validate existing • Define combined • Drive integrated • Drive process and targets—growth growth value proposition product portfolio system readiness to expectations and opportunities and messaging to execute the plan revenue synergy across markets and drive a unified go- • Enhance pricing goals customer segments to-market strategy and profitability • Enable customer and field readiness • Develop revenue • Develop new • Enhance customers • Align marketing to ensure that they baseline for the growth experience to and digital strategy are ready to combined entity opportunities by increase purchase conduct business sizing and decision • Optimize sales and with NewCo prioritizing channels mix and combined baseline access

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Pre-close planning and preparation of the target’s competition, and how well the Analyzing growth goals and opportunities, combined company can penetrate markets defining a go-to-market (GTM) strategy, going forward. By interviewing select and developing a customer experience management and customers, acquirers strategy are critical elements of M&A pre- can identify and prioritize potential close planning and preparation. A cohesive opportunities by product, customer sales and marketing vision that is backed segment, market size, or region. This by robust data and analytics can support disciplined approach keeps planning efforts functional integration, leverage operational focused on the highest-value opportunities. synergies, and increase deal value. Effective growth analyses align stakeholders – including sales and business leaders – Analyzing growth opportunities who, ultimately, will be accountable for and The first step in determining where impacted by sales results. and how to grow is to baseline existing capabilities and identify and prioritize Case study: A global technology hardware growth opportunities. While the overall company was aiming to become the deal model serves as a directional goalpost leader in enterprise asset management around baseline growth targets, it typically by acquiring an enterprise solutions provides floor, not ceiling-level, objectives. business. To achieve desired synergies, A separate but aligned growth framework the combined company needed to align its identifies a structured and logical approach sales, marketing, and channel capabilities. to analyze and quantify growth and the After identifying growth opportunities time-phasing required, based on prioritizing across combined capabilities, developing an opportunity’s size and ease of execution growth roadmaps and a future-state vision (Figure 2). Typically, the analysis occurs for business functions and systems, the in a “clean room” environment pre-deal combined company ultimately achieved close, given the confidential nature of the its desired revenue synergies and revenue information that cannot be shared during growth. It will have about 20,000 channel this phase in the M&A lifecycle. partners in more than 100 countries, and will hold a robust portfolio of intellectual A growth analysis examines the total property (IP), with approximately 4,500 addressable market for the combined US and international patents issued and product and solution portfolio, the strength pending.

Figure 2. “Where to play” framework

Where to play

1 2 3 What growth Which customer What is the opportunities exist segments to invest addressable and what customer in and focus market? behaviors to drive? resources out?

How do we define Who are target What are actionable market boundaries? decision makers and and meaningful What high level unmet what behaviors do we segments? How do we needs are we want to change? prioritize and sequence addressing? customers?

Opportunity sizing Buying process Action segmentation*

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Defining go-to-market strategy •• Sales and service delivery: Sales targets, Once the deal team has identified specific sales coverage, channel mix market opportunities, the next step is to •• Marketing: Customer messaging, define a unified go-to-market strategy branding, targeting, new value proposition (Figure 3) to achieve growth objectives, maintain business continuity, and efficiently •• Research and development (R&D): and effectively deploy both companies’ Portfolio rationalization, roadmap talent and resources. planning, product innovation efforts

Adding the target company’s offerings to the A thorough understanding of new customer acquirer’s product and service mix can shift segments and a clear GTM strategy should the GTM approach in dramatic ways. The enable better alignment of the post-merger new strategy should translate data inputs sales channels with the post-merger into an actionable, growth-focused structure product portfolio. that is defined by segment, market, product, channel, and sales. It can be challenging Case study: A software company that to identify and prioritize the most critical primarily operated with an indirect sales strategic inputs, but doing so will determine model (selling via channel partners) was the effectiveness of the deal vision, considering the acquisition of a software- structure, and subsequent decision-making as-a-service (SaaS) company with a direct when executing the strategy post-close. sales model and its own sales force. To achieve growth objectives, the acquiring One critical process is to develop jobs- company focused resources upfront to based customer segments that reflect determine the right mix of direct versus what the new company’s target customers indirect sales based on the market strategy want to accomplish, rather than how they it established, as well as whether it needed accomplish the goal. The segmentation to build additional capabilities. Based on this model should cascade into a targeted GTM assessment, the company was able to plan plan that encompasses: necessary adjustments to its sales channels •• Overall resource allocation after deal close, accelerating the time to results.

Figure 3. “How to win” framework

How to win

4 5 6 What do segments How to How to effectively do and why do outmaneuver the activate customer they do it? competition? segments?

What drivers and What are the What value proposition barriers must we differentiating benefits addresses target address with each and attributes of our segments? What are target segment? product/service? the key elements of our offer?

Differentiating Value proposition and Customer portrait capabilities offer structure

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Developing a customer experience Case study: A major telecom provider was strategy An effective and profitable customer merging with another telecom provider with Delivering a consistent brand promise and experience strategy is predicated on a large prepaid customer base. The acquirer experience across all customer touchpoints delivering the right messages and services wanted to create a seamless and integrated enables a company to gain more value from through the right channels. Common customer experience for these diverse its customer relationships. In the context wisdom holds that it is easier and less customer bases across target and acquirer of M&A integration planning, companies expensive to retain a customer than to channels, while carefully managing customer should develop and implement a customer acquire a new one – within the context disruptions as it integrated the companies. experience (CE) strategy framework (Figure of a merger, a breakdown in customer 4) that is designed to maintain business experience can amplify customer retention The project team defined the target and operations and allow both companies issues. acquirer’s current customer experiences, to unlock value for customers and including key channels, interactions, and shareholders. An effective CE strategy can In addition to strengthening customer pain points in the customer lifecycle – from increase customer retention, spur higher retention, an effective customer learning about a product and buying it to and more frequent spend per customer, and experience strategy can be a major source obtaining customer care and upgrading to lessen price sensitivity. The CE strategy and of differentiation in highly competitive additional services. The team built customer framework should focus on: industries such as consumer products, journey maps for both acquirer and target 1. Evaluating the current customer technology, and life sciences. customers to show how the experience experience and assessing the voice of would change during the integration. the customer; The acquirer then migrated the target’s 2. Developing customer experience customers onto its network and billing “personas” to build a customer-centric platform while enhancing the target’s organization; customer experience within its online and 3. Identifying and prioritizing CE physical sales channels. Ultimately, this improvement opportunities; and enabled the acquirer to achieve its cost 4. Executing and measuring the results of synergy targets and increase customer the CE improvements. retention.

Figure 4. Customer experience strategy framework

CE capabilities Retail stores

CE vision

Evolve Research Customer insight

Contact center Customer value proposition Channels Service The customer Choose Operations

Online Organization

Use Order Technology Other (e.g. email, kiosks, etc.) Measurement

Customer and shareholder value

Customer New sales Upsell ability Cost to serve Retention satisfaction

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First 100 days sprint Case study: During the merger of two B2B Enabling customer and partner readiness, 1. Talk to customers early and often, even technology manufacturing companies, the using cross-selling strategies to generate if not all the answers are available; planning team developed communications, quick wins, and building the new company’s 2. Determine the combined customer training materials, and enablement activities brand are important sales and marketing base’s needs and proactively address for the sales team and channel partners focus areas when integrating two companies them; to address key account management and during the first 100 days sprint. 3. Create playbooks to prepare customer- operational changes around quoting, facing employees to conduct consistent ordering, and invoicing. A Day 1 sales Enabling customer and partner but differentiated customer interactions; playbook (Figure 5) was created to help readiness 4. Establish a customer “war room” as the them focus on short-term cross-selling A lengthy or complex M&A transaction can central point for issue resolution; and opportunities, to consistently communicate often trigger feelings of uncertainty and 5. Prepare and support customers and deal value drivers to customers, and to unease among the participating companies’ partners for changes on their end identify potential customer risks. Specific customers and partners. Even long-term (ordering, payments, etc.). rules of engagement were defined to govern relationships may be negatively impacted areas of potential customer and sales by the slightest changes in the combined All partners need to understand their role team confusion (for example, accounts company’s products, sales model, or in the combined company so that they with overlapping sales teams positioning services strategy (Figure 5). can support operational changes and help for similar products). These measures execute the new GTM strategy. Frequent minimized customer confusion and attrition, To strengthen retention, protect revenues, and clear communication is critical to which enabled the sales teams to quickly and drive growth, the new company should mitigate attrition and create a foundation for transition their focus to cross-selling and proactively manage its legacy customer and long-term growth. additional growth opportunities. partner relationships. Five tactics can help customers and partners prepare for the transition:

Figure 5. Customer experience implications for readiness

Customer experience implications

Customer Company

Concerns on continued delivery of Focused on retention and maintaining

Deal services areas of strength announced

Focused on maintaining delivery of core Sensitive to service disruptions services during Day one cut over Day one

one Planning for, and building, a compelling, Simple, integrated experience seamless, and integrated CX future Day - state Post

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Using cross-sell strategies to generate Case study: A global biotech reagents quick wins provider acquired a major biotech Cross-selling and up-selling both the instruments provider, with extensive acquiring company’s and target company’s projected growth synergies for the new products and services can help quickly entity within three years through cross- capture post-close revenue synergies. To selling. enable the combined sales staff to promptly act on potential opportunities, company Pre-Day 1, the company developed a executives will need to clearly define what to combined list of customer accounts sell, to whom, and how to reach them: Will and distributors, reprioritized customer all products be sold to all accounts? What segments by profit pools, redeployed the products will be best-suited for cross-selling combined sales force by priority segment, by each of the sales representatives? Will the analyzed products from both companies existing reps be allowed to sell the acquired and sales bags to maximize the potential for products? cross-sells, and developed revenue synergy estimates for cross-selling, pricing capture, Company executives should develop key and channel upsells globally. account strategies to allocate cross-selling responsibilities in specific customer Post-Day 1, the company reduced segments and mitigate the risk of reverse uncertainty in the sales force ranks by leverage from key customers. Furthermore, establishing a clear account management sales compensation plans (incentives, spiffs, structure focused on priority segments; bonuses) for cross-selling and up-selling presenting a single face to the customer by should be announced and implemented integrating order channels and the quote- quickly after close. Promoting simplicity and to-cash process; launching a sales and transparency can help improve process marketing handbook at a joint sales summit efficiency and reduce legal and finance risk. to drive a uniform customer experience; and defining an approach to track revenue synergy by initiative. Through these efforts, the company exceeded cross-sell sales expectations and saw greater collaboration among the combined sales forces at key accounts.

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Managing pricing receive and analyze sensitive data from Pricing improvement efforts should be Pricing management is an important sales both companies while remaining isolated driven by the sales and marketing functions, and marketing function that executives from other integration efforts until the deal but they also require strong support from frequently overlook during integration closes. Typically, companies treat pricing as finance, IT, and operations. A dedicated planning. This can be a costly oversight, as their most sensitive competitive information integration pricing team should, therefore, pricing projects are usually quite effective and choose to address new pricing be viewed as a cross-functional “SWAT” team in terms of time to realization and impact. strategies only after the deal is complete. with representatives from each function. Most pricing benefits are realized within the This can mean a delay of six months to It also should have a clear charter from first 12 months, which is within the critical a year or longer before taking action— the Integration Management Office and time period during which analysts expect to leaving months of revenue and margin be empowered by all functions to drive see deal results. Further, a pricing project’s improvement on the table and opening the implementation of its recommendations. return on investment (ROI) typically exceeds door for competitors. 300 percent, and most pricing projects Case study: A major financial services improve gross margins by 10 percent or A useful framework for analyzing and company challenged with integrating a more– 2too much potential value to ignore. determining pricing changes is to consider newly acquired division chose to focus on the degree of market overlap and value gain centralizing the pricing function to drive To effectively build pricing improvements for customers (Figure 6). Time can be spent revenue generation. As a result, the new into an integration plan, management in the pre-close phase analyzing data and integrated business unit generated both should evaluate which initiatives should be doing high-level planning. Policy changes a significant average price increase and a completed pre- versus post-close, and how that may affect pricing improvements should sales volume increase, achieving the desired pricing strategies should be managed on be implemented in the post-close phase. impact to their bottom line. Day 1. The effective use of “clean teams” Other post-close initiatives may include in the pre-close phase can accelerate changing discounting and promotions pricing integration while enabling the policies to reduce inconsistencies across the combined company to comply with antitrust two firms, and eliminating unprofitable or requirements. Clean teams, composed of low-value transactions by adjusting the price joint staff from the acquirer, and/or target of selected SKUs. Again, the key is to quickly (and, sometimes, external consultants) can leverage the pre-close analysis results.

Figure 6. Pricing for profitability framework

Business strategy

Product management Set Distribute Company shareholder Marketing Pricing 4 value Profitability Sales Management Corporate objectives

Realize Negotiate Channels/Partners

Deals and contracting

Finance Foundational capabilities

Organizational alignment Pricing technology and Price strategy and governance data management

Tax and regulatory Advanced analytics and Price execution effectiveness price setting

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Building the new company’s brand Websites, mobile applications, and social Case study: When two technology and digital presence media channels are digital representations conglomerates – providers of hardware, A merger or acquisition often surfaces of each company’s brand and should be technology and cloud solutions – merged difficult questions about the value of one carefully managed alongside other branding they needed to develop an end-state system brand relative to another, as well as the changes. A digital roadmap (Figure 7) of tools to support the joint organization’s business areas impacted by a rebranding should define all changes across all online marketing strategy. To identify the right tools effort. Branding is one of the first visible channels to confirm a seamless customer the planning team first created a master indicators of a combined company’s experience and ongoing engagement. For inventory of tools across both companies direction and, thus, should be addressed at Day 1, marketing executives should update and a filtration system to identify which the corporate, product, and service levels. landing pages and site linkages, refine tools were within the marketing function’s Despite its importance, brand decisions their advertising targeting strategy, and scope. The team then interviewed a number are often rushed or based on political adjust the online execution of new brand of tool and capability owners across both and emotional factors. A poorly planned campaigns. Following deal close, they should organizations, which helped to identify and and/or executed rebranding campaign communicate any impending changes prioritize decision-making criteria to enable can result in a “Frankenstein” brand that to their digital assets to customers and the marketing strategy. dilutes the power of the legacy brands; an partners to support a smooth transition to overly long branding process can result in new sites and online services. Team members from both organizations missed sales and marketing opportunities. held joint working sessions to align on the Acquirers need to determine which brand selected tools, identify common tools for is more valuable to convey to customers, contract consolidation and synergies, and employees, stakeholders, investors, and set broad assessment processes to aid regulators. Even if one brand is centuries future decision-making to achieve the end old and inspires confidence at home, it may state. be a blank slate in a new market or product category.

Figure 7. Digital roadmap

Omni-channel Business strategy Primary digital engagement and brand promise capabilities

Strategy and Web transformation

Mobile Customer insights Service Discover

Product and service Social development Customer Use Shop segments

Contact center Sales

Set up Buy Marketing and customer In-store engagement

Media and advertising Customer service

Direct marketing Organization

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Post-Day 1 environment Four tactics can help guide product Inevitably, some existing products and Sales and marketing’s role in generating roadmap decisions and manage customer services may need to be retired or divested. M&A deal value typically kicks into high gear expectations during an M&A transition: In such cases, delivering the news early and in the post-Day 1 operating environment. 1. Eliminate product overlap based on in a constructive way to both customers and Important contributions include planning customer and market requirements; sales personnel will reduce confusion and and executing a product/service roadmap, 2. Look to non-customers as well as anxiety, and begin the conversation about transforming the combined companies’ current customers to build a longer-term migrating to other solutions. sales force, managing product/service roadmap of market-sustaining and pricing, and capturing long-term revenue -creating products; Case study: A global medical device synergies. 3. Conduct go-to-market (sales, marketing company acquired a competitor with an and product) summits to educate teams overlapping product portfolio. As part of the Planning and executing a product and on competitively sensitive information post-deal integration, the company needed service roadmap (previously not shared or assessed via a to align and optimize the two product Composition of the new product and service clean room) and to align leaders around portfolios. The integration team identified portfolio that the combined company will a go-forward vision; and product rationalization opportunities take to market typically is driven by the 4. Announce product roadmaps as early as and built a resulting set of analyses into a market opportunity validation conducted legally possible. product optimization business case. The at the deal’s outset. In the short term, team also developed a detailed roadmap sales and marketing leaders may take Sales and marketing departments should to realize savings by executing quick-win steps to quickly create new product convey messages about the new company’s deletion and optimization opportunities. bundles or solutions and identify product growth story quickly to reassure customers As a result, the team identified significant improvements brought in by the acquired and other stakeholders. A high-level product margin improvement and cost savings business (Figure 8). roadmap provides a starting point but it opportunities needs to include a services component. Making longer-term product decisions The acquirer should define a unified and is inherently more difficult due to the consistent strategy regarding services potential influence of customer preferences positioning and decide how the combined and technical or operational complexity. services will be described, packaged, and However, it is important to put a stake in the sold. ground early to better integrate products and improve R&D collaboration

Figure 8. Product portfolio management decision-making bodies

Defines Executive Corporate vision and strategy corporates committee strategy

Creates Tec SU1 SU2 SU3 SU4 product and P&L Tech technology leadership Product strategy strategy teams

Manages Portfolio portfolio and mgmt. Portfolio and pipeline management pipeline board

Idea Concept Plan and design Develop and test Launch EOL

Product and project execution

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Transforming the sales force The next attention area is the sales channel, Case study: A major biotech company Integrating sales forces and developing a which should be viewed as a strategic acquired a bioinstrumentation firm with sales transformation framework (Figure partnership. A symbiotic relationship with goals of expanding its market presence, 9) are significant post-Day 1 processes for partners is important so that both parties capturing revenue synergies, protecting virtually every M&A transaction. Effective mutually benefit. Agreement terms should revenue, and minimizing churn. The integration should minimize disruption to be based on profitability analyses and the acquisition doubled the organization’s sales teams and accounts, and accelerate importance each channel plays in the overall size and targeted hundreds of millions of revenue growth; in contrast, poor execution sales pipeline. synergies across geographies and business may adversely impact customer satisfaction, units. The major challenge was choosing retention, and revenue synergies. Developing a robust infrastructure to a GTM strategy for the legacy companies’ support the new sales team is another distinct brands and disparate, regional sales Integration should begin by identifying critical element. Sales processes, enabling processes and channels. the drivers behind customers’ purchase technologies, and tools need to be behaviors and developing a flexible channel harmonized and support the overarching strategy. Customers may seek arbitrage channel strategy. Communication between The project team evaluated multiple opportunities and behave in unexpected executive leadership and customer-facing options across customer segments and ways – understanding the customer is sales and marketing teams needs to be tight developed an optimized sales operating essential to unlocking the combined to enable seamless delivery of the expanded model that established governance and company’s competitive differentiators. product and service suite on Day 1 and cross-functional strategy and planning beyond. mechanisms. The team also developed rules of engagement, including defining quota/compensation plans for the sales force; revised the order-to-cash process to support a dual-brand strategy; and facilitated global sales manager readiness. As a result, the new company had a successful Day 2 dual-brand launch and Figure 9. Sales transformation framework exceeded revenue targets.

External forces Sales transformation Impacts

Growth and Market landscape Go to market strategy 1 profitability

Competitive Partner and channel management preserves 2 Market share

Customer needs Enablers and expectations 3

Enabling Sales process and Productivity and People technology execution infrastructure differentiation Technology landscape

Sales adoption Product and Sustainability service lifecycle

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Capturing long-term revenue synergies According to Deloitte’s 2015 Integration M&A transactions should be based on Survey, 10 percent of executives reported a clear understanding of desired short- that they did not know if their synergy and long-term revenue synergies. Cost targets were achieved. Successful acquirers reductions typically are a factor, but they create effective measurement criteria as should not be confused with synergies— part of their post-merger plans. These which are motivated by a vision of how the metrics make it easier to track results and combined company will be able to increase keep companies focused and accountable revenue and market share at a faster clip over the long term. than either company could do on its own. Case study: A major chemical company Many companies tend to track M&A-driven wanted to capture revenue synergies and cost savings more closely than revenue analyze sales and marketing functions improvements, simply because these to identify cost-saving synergies across savings produce a shorter-term impact its priority markets. The project team and are specific and measurable. In many conducted a baseline review of the current cases, revenue and margin goals for the state, competitive set, market, and customer new business are adjusted and there is no segments. The team identified synergy separate tracking of post-deal synergies drivers and derived potential synergy – company leaders may know they are values to help prioritize the relevant obtaining some growth but may be unaware integration activities. It also identified Brazil of what is left on the table or whether as the key market and uncovered sizable the business unit is executing against the complementary product opportunities strategy that led to the acquisition. across its portfolio. Subsequently, the company was able to unlock previously A good approach involves setting unidentified synergies and improve its accountability and measurement criteria to profitability with minimal disruption to its make certain that the company is focused customer base. on capturing long-term revenue synergies.

Closing An M&A transaction can be a huge catalyst for revenue and market growth; however, success is never guaranteed. Growth-oriented M&A may require taking a disciplined approach to sales and marketing based on a real understanding of the drivers of short- and long-term value – where to play and how to win. By addressing the priorities outlined in this article, both early in the deal process and throughout post-deal integration, companies can emerge as high performers and capture long-term revenue synergies.

11 End Notes 1. “Growth through M&A: Promise and Reality”; Deloitte Review; https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Mergers- and-Acquisitions/gx-ma-growth-promise-and-reality-021915.pdf

2. Deloitte Consulting analysis based on Fortune magazine’s Fortune 500 list (April 18, 2005); Deloitte Consulting experience tracking merger synergies; and AMR Research, The Customer Management Applications Report, 2004-2009, August, 2005.

Contacts

Nik Chickermane Steve Maddox Principal Senior Manager Deloitte Consulting LLP Deloitte Consulting LLP [email protected] [email protected]

Iain Bamford Brett Beckett Principal Senior Manager Deloitte Consulting LLP Deloitte Consulting LLP [email protected] [email protected]

About the Deloitte M&A Institute The Deloitte M&A Institute is a community of clients and practitioners focused on increasing the value derived from M&A activities, powered by Deloitte’s M&A Services capabilities. The Institute serves as a platform to build connections, showcase thought leadership, and accelerate experience and learning for those involved.

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