In this article, Elias Mazzawi reveals the new way of thinking that underpins mergers and acquisitions.
As the world pivots driven by recession, higher interest rates and supply-side challenges, the nature of M&A has changed dramatically. Gone are the days of the mega deal; incoming are the days of opportunist and strategic add-ons that might not have been possible while the economy was booming.
Deal size is reducing and companies are looking for disproportionate value-add from integration. The emphasis is increasingly on the revenue line. Put simply, that means finding opportunities to leverage the client base and the product set across the whole company.
“Revenue synergy opportunities where the whole is greater than the sum of the parts represent substantial – and possibly game-changing – value-creation scenarios”
For many, this requires a new approach and way of thinking. A new ball game in terms of skills and activities. New levels of knowledge, trust, alignment and motivation need to be built into the organisation’s DNA. For some, the new opportunities require new skills and activities; for others, they mean an upgrade to and rollout of what, not so long ago, were niche practices.
Three strategic building blocks
Integration becomes key; and the opportunity is not limited to post-M&A.
Strategy 1: Cross-sell
Cross-selling is often the jumping-off point because selling a discrete product or service from one part of the organisation to a client of another is the most straightforward. In terms of potential, it typically delivers incremental rather than game-changing revenue; one product at a time. Organisation and infrastructure-wise, it requires channels and processes that can be one-off or campaign-based; mobilised typically through pragmatic CRM operations, incentives and comparatively focused pipelines.
Strategy 2: Client management synergy
For businesses with an overlapping client base across multiple divisions or (acquired) OpCos, this is typically the next step-up. Actively managing clients across organisational and product boundaries.
In terms of potential, it can have much higher revenue impact than cross-selling; delivering larger and broader key accounts that are arguably stronger and ‘stickier’. Implementation-wise, it is unsurprisingly more complex and far-reaching; going deep into specific accounts and crossing organisation boundaries.
Openness, co-operation and information sharing are essential. Often achieved one client at a time, through light-touch client account planning and management. Building ‘community’, trust and often a culture shift that requires and relies on an effective alignment of objectives, incentives and KPIs at OpCo and individual levels.
Key points include:
- Proposition synergy
- Community accountability
- Nurture, catalyze, and navigate
Read the full article, Adapting to the new world order of M&A, on 4h2d-Ltd.com.