11 minute read
When two become one
STEVE HOYLE considers the impact on salespeople when their customer acquires, or is acquired by, another business
One of the big come from Wendy Sophoro, his main sponsor at business trends today Hedgers, and historically the chief decisionis mergers and maker. She had seemed a little more guarded acquisitions (M&A), than usual at the start of the conversation, which reached a which was understandable when she informed 15-year high in the Paul that Hedgers had just made an internal
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UK in 2015. According to data firm announcement that it was going to merge with
Dealogic, the value of UK M&A AJB, up until then a key competitor. Wendy had transactions last year jumped almost only just found out and a public announcement 63% to £381bn, involving 3,385 deals was going to be made the next day. She assured – and at a global level Bloomberg Paul that it would probably not affect the estimates buyers splashed out $3.8trn, current project, but she wanted him to know so the highest amount ever. So far, 2016 as not to be surprised when the news came out. has been quieter, with economic uncertainty and stock market volatility M&A = OPPORTUNITIES & dampening enthusiasm for deal making. THREATS
But the lull is unlikely to last for long What would you do in such a situation? – and indeed in the US there has been Having experienced many similar the recent $85bn move by AT&T to situations, I can tell you what most of acquire Time Warner. M&A seems today’s account managers do: they are certain to remain a key feature of the surprised and shocked; they believe the business landscape, although the deals customer when they say that it probably often have mixed success for the firms won’t affect the current business; they concerned – but mostly big implications may alter their forecast a little by for suppliers. sounding a note of caution; and they
Consider the following scenario: wait to see how the situation develops.
THE BOMBSHELL account managers should not be
Paul Lonstram had just finished a half-hour surprised when it occurs in the form review of his “opportunity win plan” for the of their customer being acquired,
Hedgers Pharmaceuticals account when he heard acquiring someone else or being part of the news. Up until that point his day had gone an agreed merger. The event can be well; the review sessions were always tough, but viewed as either a potentially huge he had been well enough prepared as a result problem or a fantastic opportunity – or, of his many years of experience in the industry. in many cases, both.
In particular, as he had managed the Hedgers
M&A is an ongoing phenomenon and account for the last three years, he knew (or was THREATS AHEAD WHEN YOUR able to convince the panel that he knew) all there CUSTOMER IS ACQUIRED was to know about how they purchased things The biggest danger for an account and the processes that they had to go through. manager probably lies in the period
The deal was an important one for him immediately after the announcement of personally, and especially for his regional being acquired. Of course, the official director, as it was one of the top three deals on press statements from the acquiring his “must win” list this quarter, and with a new company will be positive and talk about solution that his company was desperately trying a golden future for everyone. Senior to promote in the market. management will be emphasising that
The news potentially changed all that. It had it’s business as usual, but in reality
everyone is worrying about their own position – “Do I have a job?”, “Who is my boss?”, “Where am I in the pecking order?”, “Will I enjoy working within this new organisation?”, and so on. Everyone will definitely take their eyes off the ball, which can often be exacerbated as people delay decisions and preserve budgets until they figure out the lie of the land. Despite the right noises, purchasing momentum will be reduced and deals will be lost.
Good account managers recognise that they face significant threats, and so they act as early as possible once the acquisition has been announced. They seek to reassure their contacts, provide any information that they have on the acquirer (everyone is going to be curious as to “what they are like”) and, most importantly, recheck all current pipeline projects to ensure that there is a strong explicit business case and, in particular, that there are really compelling events.
If it is not possible to act quickly to secure deals in current timescales, then do not be convinced by your historical contacts. There will be new priorities, corporate standards, shifting powerbases, new processes, and new competitors. Many account managers make the mistake of believing that a deal will simply be delayed by a quarter while things “settle down”, only to find that they have been outflanked by a competitor that has treated this as a completely new sale and gone about requalifying, and influencing requirements and decision processes.
There’s a reason why one company invests time, effort and money in acquiring another – and it is not to preserve the status quo. Change will occur.
OPPORTUNITIES AHEAD WHEN YOUR CUSTOMER IS ACQUIRED Because there is some fundamental change happening at some stage, being acquired can also present great opportunities. In the short term, you can put forward the “not throwing the baby out with the bathwater” argument, and that stable supplier relationships can be one of the certainties in the transition to the new organisation.
Clearly, if you have potential deals in place that are not looking terribly strong, then a delay can be very beneficial.
Because it is a period of uncertainly for people, this is also a great time to build strong personal relationships. Anything you can do to help individuals when they are feeling a little vulnerable will often be repaid several times over in the future.
For many account managers, the acquisition can act as a restart to the whole relationship. It is a truism that in many accounts relationships drift downwards over time. The reasons for choosing particular suppliers get lost, and the overall strategic direction of the customer becomes clouded. Being acquired gives a good reason to review all of these possible issues. You can suggest project reviews, revisiting original propositions and regaining your “hunting licence” to go and see senior executives. This is a great opportunity to go back to basics and ask the “dumb” questions that perhaps you asked at first engagement, but which have not been appropriate for some time.
THREATS AHEAD WHEN YOUR CUSTOMER ACQUIRES When your customer is the acquirer, it is frequently assumed that the potential problems are fewer. This is often true, particularly if your customer is clearly the major player acquiring a smaller specialised organisation.
But there are many examples of what is effectively a “reverse takeover”. In one case recently I was working with a major systems
integrator that acquired a company less that 40% of its size, yet within six months 80% of the executive board was made up of individuals from the acquired company – and as you then looked further down the organisation “their people” were in all of the key decision-making roles.
Even if your situation is not as extreme as this, acquired companies can often be given a “halo effect”, especially if senior management has made statements such as, “We bought them for their world leading expertise in xxxx”. This halo effect means that individuals from the acquired company may get too much credibility too quickly, which in turn means that they are able to get involved in decisions very early and affect choice of suppliers to a huge extent that was probably not evident earlier in the sales cycle.
Many of the problems associated with being on the acquired side are also true for the acquiring side – the most dangerous of which is lack of momentum in deals, especially those without a clear business case and without widespread support. The added complication for most suppliers is that they see the situation through the lens of their existing contacts, without standing back and understanding the total situation and the fresh scenarios that are most likely to develop.
OPPORTUNITIES AHEAD WHEN YOUR CUSTOMER ACQUIRES Again, similarities abound between both acquirer and acquired in terms of the fantastic opportunities to reset the situation. Assuming that your customer is more or less in the driving position (we cannot simply assume this every time, but in general it is true), then as acquirer they can probably grant you a hunting licence into the newly acquired company. This you should embrace with vigour, as it is a small window of time when – although some may be reluctant to meet with the “friends of the acquirer” – it is hard for them to turn you down, and most will be receptive to understanding more about how they operate. You can build new relationships quickly by acting as an impartial adviser on the processes, approaches and norms in the new environment.
THE SPECIAL CASE OF MERGERS Mergers are partly a special case, in that it is often difficult to determine who is the more powerful party. Indeed, there will often be more power battles going on in a merger than a straight acquisition, and some of the power outcomes will be based on pure politics. For example, during a recent post-merger planning session, one decision was based on the trade-off, “If I can have global accounts reporting to me, then you can have all of EMEA.” While this type of horse-trading is often denied, in reality it happens. The implication is that we can only control or influence parts of the scenario, and we need to expect the unexpected.
Over time, in any merger, it is often the case that one partner becomes dominant and their way of working, norms, products and people are in the ascendancy, commanding most of the power and influence. You must be seeking to understand the relative powerbases early on and align with them.
PREPARING FOR M&A ACTIVITY By its nature, M&A activity is difficult to forecast unless you are in the very small inner circle of people doing the activity. Sometimes, a good account manager with excellent senior relationships can determine that an M&A deal is on the cards, but the details of who and when will never be forthcoming.
A better way to look at M&A activity is as simply another disruptive event, and in today’s world we know that many disruptive events will occur – if it’s not M&A, it might be sudden changes in management, massive rises or falls in market share, or some economic, technical or environmental disaster. Good account managers will be planning for unknown disruptive events through their account plan, with activities such as: l Building higher, wider and deeper relationships l Building different relationships across the organisation with the business users, technical recommenders, procurement specialists etc. l Applying multi-dimensional strategies around technology, contractual commitments, implementation standards, technical lock-ins or lock-outs etc. l Ensuring all projects have open, provable, strong business cases, whether the immediate specifier requests this or not l Having good governance in place to spot trends and issues early l Having safety valve-type relationships (this is who you can always call) at all levels, including top management through executive sponsorship.
THE FALLOUT Paul Lonstram was becoming increasingly depressed. Wendy Sophoro should not have been so confident because, while all of the public statements were about business as usual, it was obvious that all internal decision-making at Hedgers had ground to a halt. The finance department was squeezing everyone and making them justify every single purchase, senior management were just not available, and Wendy herself was extremely preoccupied as she had just been told that she was going to have to reapply for her job, interviewing against the person doing a similar role in AJB.
Paul felt there was little that he could do, apart from make contact with his colleague Sara Rajavi, who was the account manager for AJB. It turned out that AJB had been a customer for a few years, but the business levels were nowhere near as good as with Hedgers.
Sara was not as depressed as Paul, and was actually quite upbeat about the situation. She explained that AJB was in a really good state as a business, but needed a cash injection and distribution channels in Asia – both of which could be provided by Hedgers. She explained that she knew the person that Wendy Sophoro would be interviewing against, and rated him quite highly. She did, however, remark that she was operating much more widely in the account than Paul, and that at the moment she had no issue getting good conversations with different stakeholders across the account who valued talking to someone knowledgeable about the industry, and who was not part of the inevitable politics surrounding the merger. Sara suggested that she and Paul should work together to define a joint account plan that they could take to senior management in order to exploit the current situation at the merged company, which had big operational issues that they could help solve. AFTER THE FACT How do you think Paul reacted to Sara’s suggestion? Again, I know how most account managers react – they become defensive, see this as an attempt by Sara to muscle in on “their” account, and feel threatened that although the numbers are lower, Sara has managed to build and maintain better, higher, wider relationships on her side of the newly combined account.
Does this sound like the best way forward?
STEVE HOYLE is a sales consultant, coach, trainer, interim manager and author specialising in helping clients to grow the capability of their sales teams in complex B2B environments. Contact him on 07785 381563 or at steve.hoyle@linksdev.net
