Revenue Journal®

Whenever you read an article about a merger and acquisition, it's usually a lightly edited version of the official press release. What you don't read about are the bloody backstage battles that took place as the stakeholders maneuvered, and manipulated the detailed terms of the deal. Nor do you read about the mess after the deal.

Usually there's a big dog and a small dog, whether the parties involved admit it or not. The small dog is hoping to line his pockets, and the big dog is hoping to pick those same pockets.

After the deal is signed, the revenues that were roaring along at the small dog company often come to a screeching halt. Partly because the revenues were pumped up unsustainably while the small dog was trying to get acquired, but mostly because of the problems that always plague mergers and acquisitions.

There's always a shakeup in top management; the founder often moves on, or gets pushed out, leaving a power vacuum. The managers who are left are consumed by the need to assert themselves and grab a good position within the new political structure. Employees become anxious and confused, because the only clear signal they're getting from management is that there are "overlaps" in infrastructure, and "cuts will be made." The best employees start checking out the job market.

Customers, who are always leery of mergers and acquisitions anyway, defer buying decisions. They want to see if the new, combined company is going to continue to meet their needs.

This is a very dangerous time.

Here are some of the "back room" realities that are seldom discussed, and ways to deal with them.

Marketing: Who are we now? What promises should we be making?

Recognizing that your brand is the promise that you keep, not the one you make, takes us right to the core problem with mergers and acquisitions. Each company has been making, keeping, and breaking certain promises. Customers, vendors, and business partners all know what to expect from the original two companies. Once the deal is done, all bets are off. It's a completely new ballgame.

Customers are asking themselves: Is it getting easier to get what we need from this company, or harder? Are the salespeople happy about the deal, or griping about it when they come to call? It's one or the other, and griping is more usual.

While customers are wondering if the new company is going to deliver on time, the marketing people and managers are spending days in closed-door meetings with branding consultants, trying to come up with an "image" for the new company. The result is a typical "exciting new company" campaign. Yawn.

They could save themselves a lot of money and hours if they simply called customers of the respective companies and asked them a simple question: "As you know, Company X just merged with Company Y. You have been doing business with Company X. In your mind, what promise have they been keeping for you? What have you come to expect from them?"

The answers to these questions would point the way to the promises the new, combined company should be making - and keeping. Customers would reveal the "essence" of what each company was known for, and what each company did best.

This customer-supplied information should serve as the foundation for the subsequent corporate and product positioning. At the early stages, it may be best to devise a message that mentions both promises, such as, "Company X service and Company Y products. The best of both." This will allow you to ride any positive momentum from before the merger, and give you some time to develop a new promise as the combined company starts to develop its own character and capabilities.

Salespeople, the flag, and the hill

Salespeople are most productive when they know what their flag says and which hill they should running up. If they are uncertain about what their flag should say, or which hill they're supposed to conquer, your sales are going to suffer. If the confusion continues more than a few weeks after the deal is done, they will start looking for other jobs. You will lose your best salespeople - and all the deals they had in the hopper - within months after the deal is done. The less-motivated, less-effective salespeople will only add to customer concerns about the new situation.

The customer interviews we mentioned earlier can help you create the right flag and choose the right hill. Then you must gather the salespeople from both companies into a room for an all-day meeting, where you hash out the details, including overlapping and conflicting account assignments. Companies that combine forces are often selling to the same customers, and sales turf wars are common - and paralyzing. The salespeople will look busy, but they will really be concentrating on selling their internal rivals down the river. A salesperson will never pick up the flag and run up the hill when he is watching his back and has one hand on his wallet.

There should only be one sales manager over the new combined team, and that person should be given the power to make territory decisions. The sooner the salespeople know where the lines are, and what their assignment is, the sooner they can get back to running the flag up the hill. Even if they don't like the decisions being made, they will give it a try, just because they are optimists. But they must have clear direction.

Customer databases/support: Which will dominate?

After the deal is signed, you'll have two or more customer database systems, almost certainly incompatible. Should you scrap them and build a new system from scratch? Should you try to build something that will integrate them?

No. Not yet. Now is the time to decide which is the most efficient system. That system is now the official system. Port the data from the other system into the official system, then shut down the "weaker" system. The people who understand the official system must then train the people who are coming over from the dead one.

If you scrap and replace both systems right off the bat, absolutely nobody will know how the new system works. There will be no one to turn to in case of a problem. Customer service will collapse.

Make the switch as clean as possible. It won't be perfect, but it will allow you to keep taking orders and servicing customers. Use the same "sole survivor" method for your customer service, fulfillment, and distribution infrastructure.

Over time, you will be able to improve your customer-serving systems, but doing so immediately after a merger or acquisition is asking for trouble. There simply isn't any way you can know, that early in the game, how the best system should work.

Culture: How is information communicated? How are decisions made?

Top management sets the tone for the company's culture. But there are also the day-to-day, worker-to-worker and manager/worker interactions, which boil down to two things: Communication and decisions.

Communication: Every company has its own communication style. Styles range from formal to informal; continuous to infrequent; spur-of-the-moment to rigidly scheduled; face-to-face or electronic. Normally, the new management team of the combined company is unaware of these differences. The result is a debilitating tension will undermine every meeting. Or, the big dog managers will try to impose their methods on everybody else. The problem with this method is that big dogs tend to drone along endlessly, whereas the small dog usually communicates more efficiently. The company should move more in the small dog's direction.

Managers need to have a meeting to resolve communication differences, right after the deal is done. They need to analyze what both companies have been doing and decide on an "official" meeting style going forward. They should agree on meeting purposes, players and schedules, and then communicate their decision out to the troops.

Decisions: Employees, customers, and partners will become discouraged and disillusioned if the new, combined company starts making decisions more slowly than the previous company. This is bound to happen simply because there are now three entities to consider in every decision (the two old companies and the new combined company).

As with the communications style, most of the time this problem is pushed aside - and the result is it intrudes on every single meeting for months. Instead, managers need to face the fact that it's a problem, and devote a couple of meetings to it. They will need to decide who is going to have the last say on certain subjects, based on that person's success in that area. They will also need to decide if they want to use the "open discussion and vote" method of making decisions, or the "expert presents, then the members discuss, then vote" method (which is usually more productive).

Revenues can get streaming again, soon after a merger or acquisition, if managers are aware of the pitfalls and address them head-on right after the deal is signed.