Many mergers will fail to achieve their revenue synergy goals and original investment thesis. Why? The most important part of a merger is often an afterthought: the customer and partner experience.
At our recent M&A Summit, I had the opportunity to highlight why customer experience should be a cornerstone during a merger or acquisition.
There’s no question the M&A front is seeing a record number of deals this year. As Kevin mentioned in his introduction, CFO reports nearly 20,000 deals worth $2.2 trillion have been announced as of June 29, according to data from Thomson Reuters. That is about 40 percent higher, in dollar value, than the first half of last year and just short of the record breaking $2.3 trillion we keep hearing about in 2007. As deal volume continues to pick up, I can’t stress the importance of evaluating the customer experience along the way.
Many of these mergers will fail to achieve their revenue synergy goals and original investment thesis. Why? The most important part of a merger is often an afterthought: the customer and partner experience. For customers and partners, there are many reasons to consider leaving: disruption, possible loss of services or lower service levels, costs to change, strong competitive forces, and an unappealing new brand. What customers and partners do post-merger forms the basis of revenue projections, the most important aspect of protecting the value of any deal.
Firms regularly overlook the customer while tending to the pressing internal needs of bringing two companies together: financials, IT infrastructure, market objectives, operating synergies, and HR planning. But by focusing internally, they overlook the pain and perceptions customers may have about a merger that may make them reevaluate a relationship and leave, such as lost services, lower service levels, less favorable pricing, or the time and expense required to make process or IT changes.
Companies that get customer experience right realize enormous rewards. In fact, our analysis indicates that customer experience leaders nearly tripled the S&P 500 return over the last decade. Customer experience is a permission platform for cross-selling products and services; it’s a signaling mechanism that gives firms an early warning of problems that can cause churn, and it’s an indicator of reputation and word-of-mouth that either amplifies marketing messages or creates a headwind against them.
How you can embed customer experience into the M&A lifecycle
Waiting to think about customers and partners until they begin to leave is too late…the damage will already be done. Instead, firms need to embed customer and partner experience into M&A playbooks at every stage: transaction strategy, analysis, planning, integration, and optimization.
Strategy – Reinvent the experience: A merger or acquisition is an opportunity for two companies to re-imagine a future customer/partner experience. Use an external perspective to help define future opportunities, strategic objectives, and key performance indicators (KPI).
Analysis - Find the right customers…and assess your ability to serve them: Use customer and partner research to gauge the firm’s current customer experience, customer health and affinity to a target brand, and the risk of churn. Assess the current operating model from the outside in, rather than the typical inside out.
Planning - Make customers a cornerstone of integration planning: When integration planning starts, put the customer’s voice at the table by appointing an advocate to the integration steering committee or governance team or in the integration management office (IMO) to review work output of other work streams. Consider even making customer experience and engagement an explicit work stream.
Integration - Communicate properly: Firms need a communication plan that keeps customers, partners, and employees informed about changes, timing, benefits, and other key questions and concerns they have. Customer and employee research can identify anxiety points that should be addressed in these communications.
Optimization - Report customer experience metrics to the financial community: Little speaks louder about what’s important to a company than the metrics a firm reports to the financial community. Be sure to regularly share with financial stakeholders how your firm is doing on customer experience and why it’s important to the firm.
It’s not a one person job
Retaining customers during and following the transaction, capturing the intangible asset of strong customer relationships, and achieving revenue objectives depend on the attention that firms pay to customers. Luckily, leaders do not need to approach this alone. They should look to multiple sources to help them achieve their goals. First, identify and include individuals from existing internal customer experience teams. They have deep insight into what matters most to your customers. Second, most firms hire consultants to help with M&A activity – make sure these consultants understand customer experience and have the credibility to illuminate the customer perspective and adapt priorities to benefit the customer and the company.
If you want to read more specifics about this topic and how to embed customer experience into your firm’s M&A activities, feel free to take a look at my whitepaper or contact me with any additional questions at firstname.lastname@example.org.