One of the fastest (and most complicated) methods to increase shareholder value is through a merger or acquisition. The dream of merging two sales teams and two product portfolios is just too big to pass up sometimes.
Surprisingly, a recent KPMG report indicated 83% of the time an M&A event has proved unsuccessful in producing any business benefit specifically with regard to shareholder value. Further, as many as 53% of companies that go through a merger or acquisition event actually destroyed shareholder value.
In other words, the fastest and most common way to expand a company’s footprint, results in no discernible growth for the investors 4 out of 5 times.
One should be careful to note that the KPMG study focused on “shareholder value” and not generating more revenue annually.
Having recently followed several of our larger clients through M&A events, we have begun preliminary analysis on data around the activities of merging two sales teams and their ability to cross-sell products from their two respective previous product lines.
First off, what is cross-selling in this context?
Hypothetically, in the M&A context you end up with a newly merged sales team and newly merged portfolio of products. The ability of reps to cross sell products from the newly merged product portfolios to their existing customer base represents a massive initial revenue burst from the deal.
So simply, cross-selling is defined as selling products across the different brands to existing clients.
Since a buyer is six times more likely to buy from someone they’ve already bought from, an organization is giving their trusted reps even more opportunities to sell more to their client list.
The issues with cross-selling when merging two sales teams
Why then do so many newly formed companies fail to capitalize on a cross-selling opportunity?
The first interesting fact is that even with increasing the size of the sales team and number of products, it typically takes an organization more than 18 months for their reps to be completely comfortable cross-selling (based on our research).
To put that in context, the addition of a brand new rep typically takes 6-9 months to being 100% effective (i.e., reach quota). So a merger or acquisition event actually pushes the productivity of your sales team back 6-12 months longer than simply adding a new rep to your team.
According to Keenan’s 2014 article in Forbes, there are 4 key areas to for sales leaders to focus on to increase revenue; strategy, structure, people, and process.
If we apply this concept to a merger or acquisition event, the strategy, structure, and processes for the merged team are likely to have been exhaustively planned at the highest management level, but a breakdown typically occurs with the individual reps (e.g., people get forgotten!).
From our experience we’ve found that there are three compounding issues that inhibit sales teams and individuals from succeeding in this cross-selling environment:
- Culture clashes
- One-Time Training
- Ineffective Incentive Structure
Company culture is the overarching impediment for growth when merging two sales teams according to the experts. The reason are pretty simple. All sales teams by definition work differently, have different leaders, structures, methodologies, and technologies.
However, two cultures cannot co-exist within the newly formed sales organization peacefully. So reps that have been recruited and become successful in one culture are now forced into a new sales culture. This seems to be especially painful for reps from smaller, agile brands that get scooped up by much larger players.
Imagine yourself overnight having to learn countless procedures required of employees at Fortune 500-sized company. Endless red tape!
Another cultural issue that can impede merging sales teams is simply competition. Let’s face it, sales teams are inherently competitive so the team from the acquiring company will more than likely feel like a victor or conquering hero over the incoming team. They know that by and large, for better or worse, their systems and processes will be adopted when the two teams merge.
Sales teams are responsible for one thing and only one thing; generating revenue.
Any activity that removes them from prospecting, working deals, or even networking, is often seen as a distraction.
Even if that distraction will help each and every rep on the team increase their average sales price (ASP) in the long term, training is still by and large considered a distraction.
When an entire new product portfolio is introduced, training is usually one-off and, reps are on their own to figure out how to learn more.
Concomitantly, the remnants of the marketing departments will be working diligently on updating logos, color pallets, branding etc… In these cases the issues are compounded since much of the training material may not be readily available during the training period.
Two sales cultures often have radically different incentive structures. This leads to a lot of confusion reps when confronted with a new portfolio. For example, quotas probably do increase. Remember the whole reason for the merger is to sell more with cross sell than a single product line.
Managers and CFOs expect cross-selling will happen naturally, however data shows this simply doesn’t happen. Setting up incentives that drive cross selling makes sense however; companies rarely consider this pre-merger.
Solutions for increasing speed and volume of cross-selling when merging two sales teams
Tackling these issues requires some strategic maneuvering and precise planning to arm all the sales reps with the correct information they can easily and quickly access so they can be the credible and trusted advisor.
During a conversation with sales trainer John Barrows, he articulated that “sales has been and always will be relationship driven.”
Good reps need and want to keep providing value to their prospects, so when their organization gets acquired, or acquires a new product line, they will afford themselves a window to get up to speed faster on the new product line will so they can drive up their value of their interaction.
From our experience, the best practices to getting reps to cross-sell faster are;
- A unified training program,
- Trust in materials, and
- Rapid access to materials
A unified training program
At the end of day a sales rep is focused on closing business and will quickly move to closing more business with products they know rather than trying to push a product or brand that they are unfamiliar or comfortable with.
With two sales teams expected to become experts on new product lines, both teams should be provided with the same training material, portal, and platforms for their own products as for those with their other brands. While this seems straightforward, many organizations feel that it is easier to keep the pre-merger or acquisition structure in place so the reps that know them don’t lose a step. Sometimes this works opposite the way as it is intended.
With a unified training program all the reps will be on level playing field and know how to navigate the systems, even if they don’t know the products, and can focus on the task at hand; selling products, not focusing on wrestling with technology.
For an example of this, look at job listings for sales reps. It’s often considered an asset for the potential rep to be comfortable with a particular CRM. Even if it is set up differently, organizations know that a sales rep trained on a particular CRM or sales enablement platform will ramp and make quota faster than one who is not.
When merging several different organizations, or even deploying systems to large sales teams, finding the best tools for them to use is not trivial and should not be taken lightly.
Of all the features and benefits that need to be considered, by and large the key point is that those systems and platforms needs to be intuitive to use.
Trust in materials
The best reps rely on “what they know” and sell “what they trust”. The rep’s goal is building a relationship with their prospect for the long term. Sometimes, a rep is more loyal to their long time customers than they are to their current employer.
This is an area where cross-selling can fall down; reps are not comfortable with their new product lines even with the expert training they receive. As well, as mentioned above, often the materials they trained with are not the same as those they are given for the field; printing branding, product branding, and sometimes even the product names and prices are different. If a rep is neither comfortable nor has trust in the materials, the probability that they will be quick and eager to push a new product on a proven customer is limited at best.
Why risk losing a an established relationship they for a short term goal? Why cross-sell when up selling is so much easier?
Providing your sales reps with a platform or portal where they can get real-time updates on their specification, technical, and pricing sheets that is available online and off, coupled with the fact that they know how to use that tool, will have a dramatic effect increasing the reps confidence to cross-sell.
In the good old days, an experienced rep would have a well thumbed catalog and know exactly where to look on what page to provide their prospect with the best and most relevant information they are require to make a decision. In today’s information overloaded marketplace, while the print catalog is out of date, online tools such as Box, DropBox, SharePoint, or even offline PDF page flippers, turn every sales rep into a research librarian.
Again, the sales reps primary job is to sell.
A rep will likely cannibalize a larger more lucrative deal that would take longer for a shorter smaller deal due to the extensive research required. It is easier for rep to make up for lost revenue with several quick small deals, rather than hunting whales.
The final action an organization can take for increasing a sales rep’s ability to cross sell is providing them with the ability to quickly and easily access the materials they need. Providing sales reps with a tool that they can quickly thumb through like a print catalog, search like they search using Google or Bing, or filter through the massive list of products, that also provides them the ability soft quote prospects with the correct pricing will ensure that your sales teams will ramp on cross-selling faster and help secure their new position in marketplace.
Mergers and acquisitions are complicated affairs that should quickly result in a dramatic increase in sales that provides enough liquidity where investors can profit, however research has proven that this is otherwise. There are several key steps that inhibit the type of growth that a company would like to see after a merger or acquisition event; however with strategic planning on how to properly align the reps with infrastructure and tools the merged sales team should be able to ramp up to cross-sell in very short order.
1 KPMG, “Unlocking Shareholder value: The Keys to Success” 1999
2 Average 40 merger and acquisition events happening every single day
3 Someone is six times more likely to buy from someone they have already bought from
4 It typically takes a team one and half years to learn how to cross-sell