Mergers and Acquisitions enable numerous opportunities for growth. Organizations pursue these initiatives for a number of reasons—e.g. to expand further, attract more clients, or to broaden their product / service offerings. Scores of M&A transactions materialize across the globe each year, but not all of them achieve the synergies such deals promise. As a matter of fact, the success ratio is just around 27%.
The M&A Growth Framework is a structured approach to enhance the odds of a successful M&A transaction. This approach is instrumental in helping organizations capitalize on growth opportunities locked in M&A deals. The framework comprises 10 phases scattered across 3 timeframes:
- Pre-deal Preparation
- First 100 Days
- Post-deal Closure
The 10 phases of the M&A Growth Framework organized under the 3 timeframes include:
- PRE-CLOSE PLANNING & PREPARATION
- Growth Opportunities
- Go-to-Market Strategy
- Customer Experience Strategy
- FIRST 100 DAYS
- Customer and Partner Readiness
- Cross-sell Strategies
- Pricing Management
- Brand and Digital Presence Building
- POST-DAY 1 ENVIRONMENT
- Product and Service Roadmap
- Sales Force Transformation
- Long-term Revenue Synergies
The M&A Growth Framework facilitates in finding growth opportunities, aligning them with Go-to-Market Strategy, reinforcing Customer Experience, and enabling Organizational Readiness for integration after the M&A.
Let’s dive deeper into the first 3 phases of the M&A Growth Framework for now.
The first step in achieving growth from a Merger or Acquisition deal is to identify and analyze the opportunities essential for growth.
Identification of growth opportunities necessitates:
- Gauging the ability of the new company to enter target markets.
- Conducting one-to-one interviews and Focus Group Discussions with key people from the management and customers to develop points of reference for existing key competencies.
- Identifying and translating growth opportunities into initiatives.
- Quantifying growth with timeline requirements.
- Prioritizing opportunities based on their magnitude, viability, and potential for effective execution.
- Utilizing clean teams to ensure confidentiality of data.
Identification and prioritization of growth opportunities necessitates delineating the Go-to-Market Strategy of the combined entity. This phase assists in achieving the newly-formed company’s stated growth targets, business continuity objectives, and proficient utilization of unified team and resources.
Key steps involved in this phase include:
- Combining the acquired entity’s product/service portfolio with the buyer’s offerings.
- Ascertaining and prioritizing strategic inputs.
- Translating the information and inputs available into prioritized action items.
- Segmenting the customers and their needs.
- Creating Go-to-Market plans.
- Connecting the sales channels with the unified company’s product mix.
- Ensuring resource readiness, sales targets, coverage, and channel mix.
- Finalizing marketing plans: communication, branding, targeting, product mix.
Customer Experience Strategy
As part of integrating the 2 unified companies, it is critical for the senior leadership to develop and deploy a Customer Experience (CE) Strategy. A consistent Customer Experience derives more value from existing customers, aids in the continuation of operations, and boosts customer spending.
Key steps in this phase entail:
- Appraising the existing customer experience, interactions, and customer pain points.
- Developing a customer-focused organization by creating seamless CE “personas” and customer journey maps.
- Identifying and ranking CE improvement initiatives.
- Implementing CE enhancement initiatives, monitoring outcomes, and correcting the course.
- Integrating the customers and Customer Experiences of the acquirer and the target companies.
Interested in learning more about the other phases of the M&A Growth Framework ? You can download an editable PowerPoint on M&A Growth Framework here on the Flevy documents marketplace.
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Stiff market competition, expansion into new territories, product portfolio extension, and gaining new capabilities are the prime reasons why more and more organizations are seriously looking into the prospects of—and carrying out—Mergers and Acquisitions. However, only a few M&As achieve their desired revenue objectives.
Revenue Synergies are a decisive factor in closing such deals. However, identifying precisely where these Revenue Synergies lie and then capturing them isn’t as easy as it sounds.
A McKinsey study comprising of 200 M&A executives from 10 different sectors revealed that all the respective organizations of the respondents remained short of achieving their Revenue Synergy targets (~23% short of the target on average). Securing Revenue Synergies is a long-term game. The companies that succeed in securing Revenue Synergies achieve the target in or around 5 years.
Leaders aspiring to achieve Revenue Synergies should first clarify the objectives from and the schedule of the revenue synergies, lay out the organizational priorities and go-to-market strategies, remove obstacles from realizing value, and gain across the board readiness and commitment for the initiative. Organizations that are most successful in securing revenue synergies pay close attention to these 7 guiding principles during the Post-merger Integration process:
- Source of Synergies
- Leadership Ownership
- Customer Insight-driven Opportunities
- Salesperson Driven Strategy
- Ambitious Targets and Incentives
- Sufficient Support
- Performance Management
These 7 guiding principles to capturing Revenue Synergies are critical for effective integration of two firms after a merger and unlocking potential benefits from the deal. Let’s discuss the first 3 principles in detail now.
1. Source of Synergies
The inability of the leadership of the acquiring company to spot major sources of revenue that integration brings in results in losing significant pools of opportunity and failure of M&As. Realizing Revenue Synergies demands a thorough methodology to ascertain and qualify revenue prospects along markets and channels, Go-to-Market Strategies, and developing commercial capabilities. This entails:
- Evaluating customers and markets, selling offerings of the combined firms utilizing existing and additional channels, and adequately training and rewarding the sales teams.
- Coming up with innovative new products and bundles utilizing combined R&D capabilities.
- Sharing best practices and commercial capabilities that mergers offer.
2. Leadership Ownership
Organizations that accomplish their Revenue Synergy objectives guarantee that their top management and employees commit themselves fully to the initiative from the onset. They identify potential value pockets from the integration, examine the assumptions about securing value, and get them endorsed by the senior management and front-line staff. The potential Revenue Strategies are regularly evaluated by inter-departmental experts.
3. Customer Insight-driven Opportunities
Accurate estimation of Revenue Synergies demands top-level estimates—assumptions on market share gain, revenue enhancement, or improved penetration—alongside comprehensive bottom-up customer insights, and evaluation of customer relationships. Other important elements to consider include analyzing the offerings being offered to customers, discerning other potential products and services required by the customers, and assessing the ability of the sales team and brands in terms of the potential they offer to the clients.
Interested in learning more about the other guiding principles of securing PMI revenue synergies? You can download an editable PowerPoint on Post-merger Integration (PMI): Securing Revenue Synergies here on the Flevy documents marketplace.