Most M&A Deals Come Up Short
Could better product integration save yours?
This article was co-authored by Tom Ritchie, Managing Director, Cision UK.
The right acquisition can help a company leapfrog competitors with capabilities that would have taken years to develop internally. But the majority of M&A deals aren’t so lucky, instead failing to meet their objectives.
One frequent cause of failure is the acquirer overlooks a key piece of the M&A puzzle: synchronizing products and product teams to maximum effect. In the heat of deal making, product is too often an afterthought. Companies assume such details can be taken care of post-close, only to find themselves facing a messy integration.
Through interviews with our own M&A consultants and executives from customers across industries, we found that skillfully bringing product teams and products together is crucial for a success. Realizing revenue synergy targets is dependent upon selecting and executing the right strategy for your products and product development teams. If your organization is preparing for an M&A deal, here’s what you need to know.
Sizing Up Targets
At the start of M&A negotiations, the acquiring organization should understand as much as possible about the target company’s customers, products and product development capabilities. Your due diligence process should answer how the target firm will add to your own products and product teams.
To do this, make sure you know your own company: What do your customers believe your firm is uniquely great at doing? What is the product-market fit of the target and how does that connect to the parent company’s product-market-fit? Where do you believe your current and future customers will see the greatest benefit of your combined product offering? And most important: are you being realistic in the assessment of your sales engine and its ability to take on new product offerings?
Prior to closing the deal, you’ll need to formulate a product integration strategy, which can take many shapes. The right one will respect the core capabilities of each company and provide clear objectives for those responsible for overseeing the integration. Use your past M&A experience to anticipate what to expect.
As part of this planning, establish a goal that clearly spells out what success looks like. Ensure your product teams understand this goal and are empowered to achieve it.
Choosing a Strategy
Your approach will depend on what you’re selling and how it’s delivered to customers. There are typically four integration approaches you can consider:
- Keeping products and product teams separate
- Leveraging specific core capabilities to grow sales
- A full integration of products and product teams
- Or a combination of each
Accordingly, it’s important to be deliberate in the direction you choose and build an integration management structure and process to allow for pivots during the integration.
In the simplest case, the acquisition target is treated like a portfolio company and continues to operate separately. Without a shared product, there’s little integration. In some cases, technology companies may initially create a Single Sign On between product platforms, making it easier for your sales teams to start talking about your combined proposition, but also to generate interest from existing customers.
More complicated scenarios either combine some features or core capabilities or move product features from one firm into the product platform of the other organization. Both approaches require integration teams to work closely with product experts to prioritize and sequence the integration of product features. The best integration teams make these decisions based on high-priority areas of value, the voice of the customer and product development throughput capacity.
Companies will often mix and match these strategies, keeping products and their teams separated for a period of time before integration. From the first day of the integration, assign a product leader to own the goal and monitor how your plan to achieve synergies is progressing. That person should have deep product experience and the ability to support the acquired teams’ integration.
Throughout this process, identify the people who know the product best and motivate them by communicating their value to the new product structure. It’s easy to get caught up with the strategy and forget people will drive the success of the merger.
Executing the Integration
Once the deal is closed, the real work of merging products and product teams begins. This process requires communication to unite the executives’ strategic plans with the ground-level employees’ tactical needs.
On the first day following an M&A deal close, there’s a huge risk of losing top talent from product teams, which retain vast amounts of institutional knowledge and technical expertise. These teams will want to see a clear plan for the future for integrating the product and their place in the future structure. They will also need resources to make the integration successful, a clear goal to guide them, and a financial plan that’s realistic.
"When Cision acquired TrendKite, our product team was faced with the challenge of integrating two formerly competing product suites and product teams," said Chris Copeland, Cision UK's CTO. "We quickly moved to integrate the product management team by appointing senior leaders in charge of major functional areas of the product and staffing their teams with a mix of employees from the two previous companies. While the change was initially viewed as abrupt, it quickly fostered the close collaboration and knowledge sharing we needed to succeed together."
The key to a successful integration is to work with product team leaders to create a plan for how the teams will work together and what processes they will follow. Employees in the acquired organization should also have clear expectations on future staffing plans. If in doubt, assume that your best talent is the most likely to leave.
Product leaders should come out of this planning with a firm grasp on the integration objectives, clear goals to drive towards, and plenty of support. If you can accomplish that, your M&A deal will have a great chance of success.
About Cision
Cision Ltd. is a leading global provider of earned media software and services to public relations and marketing communications professionals. Cision's software allows users to identify key influencers, craft and distribute strategic content, and measure meaningful impact. Cision has over 4,800 employees with offices in 24 countries throughout the Americas, EMEA, and APAC. For more information about its award-winning products and services, including the Cision Communications Cloud®, visit www.cision.com and follow Cision on Twitter @Cision.
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