Matt Bartels: Mark. Studies show that 70 to 90% of M&A deals fail to reach their projected value, often due to post-deal challenges like operational misalignment, cultural classes, inadequate customer retention strategies. What are some of the biggest highlights that you’ve found in your recent research on M&A post-deal challenges?
Mark O’Donnell: Yeah, there’s a lot of challenges that companies face, but I’ll first start by saying that companies that are able to integrate successfully and actually realize the value of a deal that they expect, are ones that have strong leadership, setting the objective and the goals and the vision of the organization as it combines and comes together, a unified commercial strategy, and a roadmap for how operations are going to be integrated. If these three pieces are put together and executed well, companies will actually realize value as opposed to just adding complexity to their organization.
Matt Bartels: Okay. So you talked about the leaders, that’s a very important thing. So, what are some of the specific things that you would look for leaders to do to ensure a more smooth or a more aligned integration in these situations?
Mark O’Donnell: Yeah. Setting clear priorities is really important. Communicating consistency. A big piece that helps organizations pull off integrations is actually having a cross-functional task force with the feedback loop. Leaders need to understand how well they’re doing with the integration process. Having a feedback loop allows for course correction when it’s needed and not being reactive, but actually proactive.
Matt Bartels: Okay. Talk about those real difficult times. Give me something where we’ve got two cultures that were completely at odds. What do you do when you’ve got a kill what you eat strategy, or a pure ‘everybody’s on the same team’ strategy. How do you make something like that work?
Mark O’Donnell: Yeah, it’s a difficult question to answer because you ultimately have to know what is the goal of the two companies coming together? What is the investment thesis? What’s the vision? And one will oftentimes win out, but sometimes you might end up with something completely different than the two entities that you’re bringing together in terms of culture. I personally think it’s really important to understand what type of integration strategy you’re starting with. So, is it a vertical integration? Is it a horizontal integration? Do you actually need the teams to come together to be successful? Or should they be separate? Are they not actually going to play together commercially in the future state? But it’s important to ask and answer all those questions to actually understand what level of integration you need from like a commercial team perspective, and then you can kind of plan from there.
Matt Bartels: Yep. Iternally dealing with the friction and dealing with all that change management, you’re talking about a lot of people, a lot of lives that we’re talking about. Let’s flip it now, let’s talk about some of the challenges with the customers. So we know that customers come first in a lot of organizations, and retaining customers in a situation like this, while there might be a little bit of turmoil, can also be one of the main drivers of making sure that it is a success in the long run. So, what are some of the best practices or things that you’ve seen as far as maintaining strong client relationships when you’re going through a period of change like this?
Mark O’Donnell: Yeah. Again, this is an area where communication is key and transparency, where it makes sense, is also very key. Customers want to know what’s going to happen. So, being clear and transparent with them is really important. How will they benefit from this acquisition or this integration? Will their services be improved? Will they have better pricing? Will they have better technology? What’s changing for them and why is it good for them is really important to make clear, and that should be part of your retention strategy. But that’s just one piece. You also have to understand how all the pieces are moving around the customer and making sure internally, everyone is informed of what piece they play in that bigger puzzle. And your account manager plays a really big role in informing customers of what’s going to change and what to expect, but also being a feedback loop for the company. If there are pain points we didn’t understand or foresee, how can we mitigate those or adjust so that we aren’t putting our customer relationships at risk? A real key metric we should have in place and monitor, not just for any company always as an NPS score, but we should also really be leaning into those metrics when we are integrating to make sure that we are still satisfying our customers. Regular check-ins are also key with our customers to ensure that it’s a smooth transition for them.
Matt Bartels: Okay. So what are the most common concerns that you hear from clients?
Mark O’Donnell: Yeah. There’s a handful that actually drive churn with customers. So, some of the issues are actually loss of products or offerings that a customer is used to getting. That’s a common concern. A reduction in level of service or touching from a commercial perspective or losing their account manager. Those are the more common concerns that a customer has. And so again, it’s really important to have the right communication strategy in place so that they are aware of what’s going on and what to expect. So whether that’s putting out FAQs, having a task force put together to answer questions that customers might have, having webinars, there are lots of tools that we can use or that are at our disposal to make sure the customer is comfortable with the transitions that are being made.
Matt Bartels: Yeah. So can you bring that to life? Any examples that would illustrate some of the challenges or some of the best practices that you’ve seen actually work?
Mark O’Donnell: I’ve actually had quite a lot of clients with integration issues where they’ve acquired companies, and they didn’t actually integrate the commercial team. And so you’ve had multiple people talking to the same customer selling different products or even similar products, but they’re all within the same company. And what that ends up doing, if it’s not well thought out and well communicated to customers, is create a lot of confusion. It creates confusion internally, for sure, but also customers are confused why now they’re talking to two, three, four people at a company when they’re all trying to sell the same thing, right? And so it’s important, and I’ve done this with many clients, where you actually map out who are your customers, what are they buying, what are your offerings that you can sell to them, and thinking about it now from a holistic approach so that we cut out redundancy, we cut out confusion, and we ultimately drive the end goal: more revenue and more retention and more client satisfaction.
Matt Bartels: Yeah. So we’ve talked about bringing together the teams internally, the importance of leadership, we’ve talked about making sure we’re taking care of our customers. Let’s talk about operational challenges. What are some of the more common operational challenges and what are the the ways that you see folks taking them on?
Mark O’Donnell: Yeah, I would say one of the most common challenges I see with an integration is not understanding that your commercial organization has to go into different systems to actually get customer insights, intel, understand opportunities, and even process orders. And so a lot of times the strategies have maybe a holistic or unified sales approach where a sales rep is able to sell now everything that the company has to offer, not realizing that they’re not trained or even understand the different systems that they need to go into to actually execute a deal. And so system incompatibility is a big hurdle that a lot of organizations sometimes overlook. And it stands in the way of being successful in your commercial objectives and goals. So, actually mapping out what you have in place today, what’s your end goal, and then what are the gaps that you have, or the current systems that you have in place today, and what does it look like to bring those together and to consolidate those and make the actual processes simple for the organization to execute, is really key for success with any integration.
Matt Bartels: And that can be really, really big, really big projects there. How do you balance getting some short-term wins with the long-term operational nirvana.
Mark O’Donnell: Yeah. I mean, every case is going to be a little different. You do have to look at where there is value that can be immediately be gained. One of the things I typically recommend is anything that’s customer-facing at that that they’re touching, we really do need to make sure is smooth and clean because it goes back to customer retention. If a customer is confused, they don’t know how to interact with us, that has very negative impact. So we should always prioritize whatever the customer is interacting with should be as smooth and clean as possible. Sometimes it’s messy in the back end and that might take a long time to to smooth out, but prioritization should really focus on what can we get immediate gains from. And then how can we make sure the process for the customer is as smooth as possible? And then we should ultimately make sure the whole system is smooth and consistent and efficient on the back end for our incumbents or our individuals that are helping us actually execute our commercial strategy.
Matt Bartels: Okay, so the three big ones leadership, internal customers, operations. Final question. All of this is great, but how do you know if you’re going in the right direction? What are some of the most common metrics of success that you would be looking at to say, yes, we are going in the right direction or wow, we’ve got to do some course correction?
Mark O’Donnell: Yeah, I mean, there are a handful of metrics. Financial ones are good to have. So, are we getting revenue growth? We had this thesis that if we bring these companies together we’re going to get X, Y or Z more dollars. Well, how are we tracking towards that? What are the costs that we have independently? What are the costs as we bring this together? Did we go up? Did we go down? What do our margins look like? There are a lot of financial metrics we can obviously look at, but there’s also efficiency metrics. Can we increase people’s account load? More revenue expectations from a seller. Does the sales process time decrease? Increase? What does that look like? These are all important metrics to have in place to see the change that we’re coming from to make sure that we’re actually achieving our goals. Ultimately, it’s really, again, I can’t hammer this home enough, to retain our customers and make sure that we’re not losing them. So retention rates, feedback surveys, renewal rates, net promoter scores, these are all important metrics to have in place as well to monitor our success.
Matt Bartels: Yeah. Great. Well, Mark, I want to thank you very much for taking the time to speak with us today and share some of your thoughts on what’s going on out there in the world of post-M&A integrations and some of the challenges, because we know that in situations like that, it can be very, very stressful. A lot of pressure, but there’s also a lot of opportunity out there if you go about it the right way. If you were to summarize the whole thing in the top three points, what would you say?
Mark O’Donnell: To summarize everything? It’s communicate, communicate, plan, and communicate.
Matt Bartels: All right.
Mark O’Donnell: If you or your organization have interest in learning more about how Alexander Group can help you and your company, you can find us at Alexander Group.com. Or you can reach out to one of us directly, and we’d be happy to set up some time to chat with you.
