Astute Planning, Flawless Execution,
Delighted Customers

Issue #114

Tuesday, June 12, 2007

Join Craig Bailey at SCORE 2007

CCI President Craig Bailey will be moderating a session tomorrow, June 13th at the SCORE 2007 conference in Boston. The session, entitled "Creating a Passion for Service Excellence," will feature a panel of accomplished executives from Customer Centricity clients including:

The annual SCORE conference attracts over 250 executive level attendees and direct reports in operational areas such as customer service, human resources, sales and marketing. The program focuses on providing practical insight into Loyalty Management and Customer Operations. For more information about the conference, please click here.

Growth by Acquisition
By Craig Bailey, with contributions from Bob Nealon of Nealon Advisory Group

In this article we continue our series on the topic of Growth by Acqusition, providing insights to guide you through your M&A planning and integration efforts. This series will cover the following areas:

  • Is it a merger or an acquisition?
  • Goals and necessities of the acquisition
  • Setting the stage for successful integration
  • Define the integration team
  • Establish key assumptions and planning parameters
  • You show me yours / I'll show you mine
  • Project management takes over
  • Organizational readiness

In the prior edition we covered the topic of "Is it a merger or an acquisition?". In this edition we will cover the goals and necessities of the acquisition.

Goals and necessities of the acquisition

Before you discuss "how" to integrate, it is important to clearly articulate to all parties the goals and key necessities of the acquisition. At the end of the day, it is all about "the numbers." Addressing the numbers can be broken down into the following major objectives:

  • Enable integrated financials
  • Increase revenue
  • Achieve operational synergies

Enable integrated financials

The basis or justification for performing an acquisition is the desire to bring together two companies with complementary products, services and customers, where the combination of the two is (much) greater than the sum of the parts. As such, one of the very first things that a company must do upon completing an acquisition is enable integrated financials for external reporting purposes. This requires closing the books of the acquired firm as of its last day of operation as a stand-alone entity, and including the acquired firm's financials within the acquiring firm's numbers on a go-forward basis. This sets the stage for the combined firm to demonstrate the results of the acquisition. This understanding brings us to the next topic areas.

Increase revenue

The primary objective of an acquisition is to increase revenue by enabling sales representatives from both firms to carry additional product in their briefcases as they call upon a common and/or expanded customer base. This can typically occur fairly rapidly by:

  1. Enabling the sales team of the acquiring firm:
    • Train the sales team of the acquiring firm on the acquired firm's products and services.
    • Create a link from the acquiring firm's sales process to that of the acquired firm's. Said another way, the acquiring firm's sales reps close deals for the new (acquired firm's) products and services which flow to the acquired firm's "as is" sales order processing, fulfillment and invoicing flow and systems. At this stage the key is to keep it simple. The ONLY things that need to be changed within the acquired firm's sales process is the company logo on sales quotes and contracts, and perhaps a revision to the acquired firm's terms and conditions (although addressing the T's and C's is not always required at this time).
  2. Enabling the Sales team of the acquired firm:
    • Train the acquired firm's sales team on the acquiring firm's products, services, processes and systems.

You have now fired up your combined sales engine to move a broader set of products and services. Assuming that the appropriate level of integration planning took place during the acquisition process, the above activities should be able to occur within 30-45 days of closing the acquisition. However, achieving this timeline will require that everyone in the firm understands that realizing the anticipated benefits of the acquisition is the top priority of the company. This ensures each person who is required to support the sales integration effort provides the appropriate level of focus and attention.

Again, the primary goal of the above is to quickly enable the combined sales team to sell a broader set of products and services, to a broader customer base, thus increasing revenue. In parallel with firing up the sales engine, you will also want to begin addressing the medium to longer term opportunities of the acquisition: achieving operational synergies.

Achieve operational synergies

Achieving operational synergies (a.k.a. cost savings) results from a combined organization that is able to perform key (shared services) functions more efficiently than the two entities would have separately. This involves identifying opportunities to reduce total headcount, facilities and IT systems. However, prior to taking what may seem to be the easy step of "whacking" headcount, facilities and IT systems, a review must take place to rationalize elements of BOTH businesses, although the level of rationalization will vary depending on the maturity and longevity of each firm involved in the acquisition. This review will include the following:

  • Where there are two CRM and/or ERP systems, there will likely only be a need for one that meets the needs of the combined organization. This results in reduced software licensing and hardware maintenance costs, IT headcount and even data center facilities space.
  • Where there are multiple facilities that perform (for example) warehousing and distribution of similar products, there will likely be opportunities to consolidate unless the additional facility(s) resulting from the acquisition provide geographic diversity that the acquired firm would not have otherwise had in its portfolio.
  • And finally, a department by department review across the combined enterprise will take place to identify opportunities to consolidate.

While these are the tougher topics to discuss with regards to acquisitions (as people's lives are impacted), make no mistake: addressing the above (head on) is critical to achieving the anticipated benefits of the transaction. And, it should be stated that there are no sacred cows. That is, in our experience, the people, process and systems of the acquired firm don't always end up on top, although that is a frequent outcome. The more savvy leaders of firms performing acquisitions conduct zero-based thinking. This involves identifying the best, brightest and most committed people, the most flexible and customer-friendly processes and the most robust and flexible systems infrastructure from the combined company, from which the business can be scaled to the next level.

In closing, we want to emphasize that it is EXTREMELY important to devote sufficient attention to planning your operational integration activities "pre-acquisition." In our experience, the anticipated synergies of acquisitions are frequently not realized in the timeframes baked into the financial model for the acquisition. Typically, key functional leaders are brought into the inner-circle of the acquisition evaluation process and integration planning exercises to perform reconnaissance with regards to their own corner of the universe (their functional department) ONLY. However, to achieve the anticipated synergies of the integration, cross-functional planning is required where an over-arching integration plan is defined that weaves together all the moving parts and interdependencies across the organization.

In the next edition we will cover the topic of "Setting the stage for a successful integration."

If you would like to receive more information on this subject without waiting for the full newsletter series, or if you need assistance with an acquisition you are planning or are in the midst of integrating, please contact us. We can help!

 

Contents

+ Join Craig Bailey at SCORE 2007 in Boston
+ Growth by Acquisition
 


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