Join Craig Bailey at SCORE 2007
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
Growth by Acquisition
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
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
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
Enable integrated financials
Achieve operational synergies
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.
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:
Enabling the sales team of the acquiring firm:
Train the sales
team of the acquiring firm on the acquired firm's products and
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).
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
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
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
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!
+ Join Craig Bailey at SCORE 2007 in Boston
+ Growth by Acquisition
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