Rethink Sales Podcast Episode 29: Mergers and Acquisitions

Welcome to the Sales Globe Rethink Sales podcast. I'm Mark dinolo.

And I'm Michelle Seeger.

And today we're going to talk about M and A mergers and acquisitions as related to the sales organization. Michelle.

Yes, we are, Mark. What we know is that 2021, it was an unprecedented time for merger and acquisition activity. And we know that now sales organizations are going to have to deal with the downstream impact, I call it the downstream impact to the sales organization for what the expectations are out of that merger and acquis.

Yep. So today we're talking about M and A, Michelle, as it relates to the sales organization. Because too often there's this big vision on what's going to happen with a merger or an acquisition. And then the sales organization is an afterthought. What happens to sales.

That's right. So in our work, Mark, the reason that we decided to do this podcast is so many times we're called into a sales organization to help them out to. To help them realize some of the things that they have to do, which is often a year or more after the acquisition really takes place or the merger takes place.

Right. So those big visions aren't happening the way they thought they were going to happen. In reality.

They sure aren't. And if we look at why you and I were talking about, why this was a really important podcast, because we know that in 2021, there was more M and A activity that took place than at any time in the history of the globally M and A activity. And now we also know that 70 to 90% of mergers actually fail to realize the expected benefit of the merger to begin with. So now we're entering a year, it's 2022, and we're entering a time when we've got all this M and A activity that took place and companies are making decisions for what it is that they want to get out of that M and A activity. And, and the sales organization, as we know, is going to become the. The beneficiary, if you will, of realizing some of those results.

That's right. That's right. So let's get into some of the reasons that M and A happens in the first place.

Oh, yeah. So we know what a few of those are, Mark. We can start with augmenting offerings. So an organization may change their strategy. I'm thinking about a very recent merger that we heard about or acquisition that we heard about, which was Hewlett Packard. They just acquired Poly, which is really interesting when you think about. Hewlett Packard has come out and they said we are going to lead the future of work. And what we also know is that Hewlett Packard said we're leading the future of what they believe is the hybrid workforce. Now I don't know about you, but I know when I think about Hewlett Packard, I think about printers. Like what do you think about when you think about HP Enterprise?

When I think about HP, I have nightmares back to business school with that HP12C calculator that had the RPN that you had to do the calculations backwards.

Yeah, there was that.

And I'd be sitting in exams and everybody would be like clicking away on those things. So I have like these visual reactions. But, but now I think about printers.

Right, right.

Because I don't use that HP12C anymore, I just use my iPhone. But so I think about printers.

Yeah, we, I guess we really do. And they want us to be thinking about though how HP can enable the future of work. So they bought a big brand, whole new product offering. Now I don't know what their plans are, but I'm speculating that that's the reason they did that. So that could be one reason. So another reason is, you know, it just becomes part of their growth strategy. So think about really saturated markets or you know, there's a whole lot of players out there and small players and companies are getting bigger. So it becomes part of their growth strateg to grow by acquisition and not so much organically. And that gives them, you know, greater market coverage. For example.

Yeah, so you got a few flavors of that. So you got your classic roll ups which we're seeing a lot of that in software right now as an example. So you've got a lot of technologies that you know are in the market and that whole stack can be consolidated. So you have the roll up, then you have the growth strategy where take the cable business or wireless business where you have licenses or territories that can be rolled up. So a lot companies have grown that way. So you know, there may be constraints where that's part of the strategy or you can simply, you know, add it on faster that way rather than building it. So the acquisition growth rather than the organic.

So there's a lot of reasons why companies, you know, acquire another company. So what is it that if we think about what the companies expect, there's a lot of expectations that come out of the board. It depends who you're trying to please. Right. A lot of things that that happen and what we know is one of them is synergy. So that means that what we have seen is, you know, and again, implication, sales organization, you've got a global company that purchases another global company. How many times have we seen there's more than one country manager?

Right.

All the way down to so many different roles. Right. So even if they say, they say we're going to leave the sales organization intact, at some point, there's going to be a synergy expectation.

Right. So synergies, kind of code for, hey, we can get a lot of cost out of the business here because we're going to have redundancy, right?

Yeah.

But then you go, okay, well, we got two CEOs, two CFOs, etc. Etc. But then you start working down the line into the sales organization and it gets a lot more complicated.

It gets very complicated very quickly. So synergies, the second thing that we see, another big one, is they're expecting increased revenue. Right. So you just mentioned synergy. The expectation is there's going to be a reduction in overall cost of doing business, but then at the same time they're expecting an increase in revenue. And that's a real. That's a real tough one.

Yeah.

So, you know, we think about that and then of course, there may be an expectation on what's being sold into the market. So think about those bundled products and services as opposed to these two sales organizations that are just going to go out and do their thing, if you will.

Right, Right. So you take all those and all those expectations. Right? Synergies increase revenue. It's part of our growth strategy, et cetera. And who wants this to happen with an organization? So you got your deal people, right? You've got your people at the head of the organization that want this to happen. And there are certain people that are trying to sell it to the organization, to sell it to the investors. And. And then what happens? We end up creating really high expectations. And you talk about 70 to 90% failing. We create really high expectations that are hard to. Hard to meet.

Very hard to meet. Now, what I didn't hear you say, and who I didn't hear you say had a seat at that table, is a sales leader. And that's typically what we see true. So the sales leader's gotta inherit it and deal with it, but often doesn't have any say in the augmented offerings or what the growth strategy is going to be. They just have to figure out how to execute on that.

So if you take those two big areas, you talk about synergies and you talk about growth, the sales organization is a Big part of both of those, because synergies are so many people in the sales organization. For obvious reasons. There's synergy possibilities there and growth. That's where growth comes from, is from the sales organization. So all sorts of growth strategies. Like we're going to sell more stuff, but how are we going to do that? Well, we're going to cross sell all these different things we're going to do. But that would say that if you're going to do an effective job of diligence in the front end of the deal before you're actually doing the deal, you would have a sales view on it. It may not. May not be your chief revenue officer or your chief sales officer, but you have to have a sales lens on this whole thing in the diligence period before you do the deal just to understand what the realities are.

Definitely. And that's what we see as a big miss often. And you know, for, for a note to CSOs, CROs, sales leaders, if you can, at least at this point. So we've done some of this work. Some sales leaders have been in a fortunate position where they've at least been able to use a third party to help them gather the information that they need to be able to deal with these downstream impacts or the things that they know that they're gonna have to do. But they still aren't really able to say, well, we think we can grow by 5% when, you know, the investors have said it's going to be 15 or whatever the number may be. We don't see them having an influence. What we do is we see them having to execute and to realize the benefit that's expected out of the deal.

Yeah. So if you want to get a more realistic idea of what the possibilities are, put a sales lens on it. But then you also have to balance the idea that there's a tremendous motivation to do the deal. So they may not want to hear all that. And then you also have the other side of it, which is you may not have complete visibility on the organization that you're going to acquire or merge with. Right. So you may not be able to see. See the details on the other side. So you have to do a little bit of estimation of what, what's going on there.

Yeah. So, you know, a good little hint on that one. If, if a sales leader can have the ability to have, like we talked about, a third party, go in there and get that information for him or her, the benefit to that is that when the merger actually takes place and the press release happens that sales leader has the ability to send out messaging and communications. That's really going to resonate because they know what they're dealing with. They already know the players, they understand how the team is structured, what their pay has been. There's a lot of information that we actually recommend that the sales leaders go and gather in advance. You can find that actually@salescope.com but there's a lot there. But I think the main point there is get the information in advance.

Yes. So know the implications up front because if you don't, like you said earlier, you're going to find out sooner or later.

That's right.

What's happening in sales or what's not happening in sales.

Right. So, Mark, let's talk about. We knew we didn't have a whole lot of time here, so we decided to pick just three different areas that we were going to address that the sales organization inherits, if you will, as a result of expected synergies or increased revenue or whatever the board has decided or whatever the purpose is of the merger and acquisition. And you touched on the first one. So let's talk a little bit about cross selling. Cross sell. The interesting thing about that is whether you're part of a merger acquisition or not, cross selling is just so much being put on organizations to do. So when I, what I mean by that is you may have, without an M and a scenario, you may have an inside sales team that's selling something, a field sales team that's selling something else and they're trying to figure out how to cross sell those. Well, it becomes a whole lot more complex when you're talking about cross selling very different products and services from a company that you have acquired.

Yeah. So that's, that's the great hope in a lot of acquisitions is cross selling. And so again, at that high level, at the broad brush level, you're going, okay, well, we have all these complimentary products that we can sell. When you get down to the sales level after the deal, you find out, wow, maybe our segments aren't the same segments or maybe our buyers aren't the same buyers. So if we have a product that we sell to the CIO and then we acquire a company that has a product that gets sold to, you know, another, like the operations organization, you've got two different buyers. So that's not immediately a cross sell opportunity.

No. Now I remember you're making me think about a technology company that we did some work with and it was about 18 months after the sale, had Closed. And they had not sold. They had not cross sold one. Not one customer on their side, not one. And what they determined was that it was the wrong customer. So when they went in and actually looked at the segmentation, there was so many assumptions around what that customer would buy without actually doing that due diligence. The other thing that we saw happen, that we've seen happen is you talked about how, you know, maybe a particular purchase is oversold and sometimes there are some flaws in that purchase, but it's too far down the road and they just go ahead and bring it in anyway. There was another case with another client where the product and service there was that cross sell expectation. And the issue was the product wasn't up to par with the core product that the company, the parent company was offering into the client base, which was very upsetting to the sales organization.

Yeah. And to customers, too, because it's not up to par with or there is a brand image from the acquired organization that customers don't respond to. And so now this is being bundled with something that I do like, and I'm being forced to buy this thing. So you have to look at customer receptivity as well.

Now, let's talk about another challenge that happens, and that would be the ability for the sales organization to sell that product and service. Now I'm thinking about another client. Right. Let's talk about when Plantronics bought Polycom. Right, right, we can talk about that. So Plantronics just number one in the market for headsets. Everybody knows that. Right. They're the ones that went to the Mars or the moon. Not Mars. They're the moon, right? Not yet. Not yet. Anyway, they went to the moon and, you know, great product. And they believe that they needed to augment their, their offering into the market. And they do a lot of B2B sales. Right. So inside sales wearing the headsets and then teleconferencing, you know, hardware. Well, they wanted to get into some virtual and other software that would augment them. So software as a service. And they bought a company that did. That was the Polycom company. Great brand, Right. A bigger presence, I believe, in Europe than. Than in the US or abroad. And so they, they made that acquisition and there was an assumption that people would be able to sell each one of the products. Right. But you've got this transactional product that was handled largely by inside sales, easy sale, brand name recognition, know what you're gonna get kind of thing. And then this software with this long sales cycle, whole lot of complication. And technical, you know, expertise required. And, you know, that can be a real challenge. And we've seen that time and time again where that's not really dealt with up front.

And I have to mention one of my favorite examples now, this one's from probably, I don't know, 20 years ago. This is an old one, but I'm not going to name the company. But it was a very large transportation shipping company that we all know, and they wanted to get into the financing business. They wanted to get into the capital business. And they thought, well, we're going to start and also acquire some companies and build blank capital. Right. And our packaging salespeople are just going to go in and they're going to offer financial services to the customers as well.

Wow.

Well, obviously it's a completely different buyer. Right. But they did it. And the reps weren't able to do it, but they did it and they realized, oh, you know, the logistics manager's not buying financial services or, you know, receivables, factoring or leasing or anything like that. That's not who's buying it. And so, wrong buyer. And then they didn't have the skills to do it as well because, you know, a person who's selling shipping services doesn't know much about financial services. But that was such a poster child long time ago. But it was such a blatant one. It was amazing that that actually happened.

Wow. So it happens every day. All right, so the big takeaways on cross selling, it's going to start with, okay, make sure that you look at your customer segment. That's a big one. And understand like, you know, we. I remember I was part of our approach is that we look at the customer segments of both companies and what's the same and different because oftentimes even there's an assumption around what was used to identify that customer segment. And sometimes those are different company to company. So they're not necessarily opposite happens. Look at your segment and then also understand how that product and service is different from what you're offering today. And what needs does the organization have to even enable that?

Yep.

All right, so let's shift over to sales roles now, Mark. And when we think about that, the biggest challenge is the integration of different sales roles from the different companies. Right. So we see a lot of challenges around, you know, what that looks like. And it really starts with the title of the roles. And there's this underlying assumption that because I am an account manager, I'm an account manager at company A. I'm probably the same at company B. So there's the question of title and.

It'S like that old adage, you know, you can't judge a job by its title.

Okay, all right. So there's the question of titles, but then there's also the question of function. So it's also assumed the same. If I am an inside sales rep, I'm a field rep. What I'm doing is the same from company to company. Right. And I'm just using, you know, inside and field because there's some assumptions around that. And I, I'll bring up an example of a high tech company that we did business with and in that example we had two inside sales positions and the parent company, that inside sales position was paid significantly less than the inside sales rep at the company they were acquiring.

I remember that.

Yeah, remember that. And you know, through that due diligence we, we were able to understand what was different and why. But in the meantime, before the merger even was finalized, what we found is that, you know, the rumor mill hit, right, hit globally and a lot of people from that other company just started to jump ship because they believed they were going to work for a company that was a really low payer, if you will, that's high tech company which traditionally pays better than many other companies. So let's discuss a little bit about what was different on those roles. The parent company, Inside Sales was an entry level role that would lead to field sales. A lot of the business that they did, it was really inbound lead generation, very transactional product that had a global brand name associated with it, very easy to sell it and people would often just, you know, buy it, could buy it from the Internet as well through E Comm. So then you've got this other company that has a highly sophisticated software that they were selling and a lot of virtual demos happening. And I believe it was something like 15 to 20 years experience required to do that job. And those people earned quite a bit compared to the other.

So really just very different jobs even though they had the same classification or maybe even the same title.

Yeah, so that's, you know, that's a tricky one is just, or one thing to really think about and consider is don't make assumptions that just because you're inside sales or you're an account manager or. Here's a good one, I heard somebody talk about a BDR business development rep and they were talking about that being an inside sales function that, you know, does this digital marketing lead qualification when we have another client that I'm thinking Of right now where BDR was actually one of the most important field sales roles that they had that was out there, you know, to get new, very strategic business for the client. So again, the title does not tell the whole story. Or what was the, what was the thing?

You can't judge a job by its title.

Exactly. So you can't judge a job by its title.

You never know.

So what to do?

Yeah. What do you do? Well, you have to have some way to classify. Line them up, compare them.

That's right, yeah. So we, we do a couple things here. And one is this role matrix that we talk about, which is really nothing more than an extension of something that we've been doing for a long time at sales globe around these sales dimensions of a sale of a sales role.

Yeah.

And what we know is that there's like six key dimensions I'd like you to talk about.

Six dimensions? Yeah, that's our biggest hit actually.

Yeah. Oh, biggest hit online.

The six dimensions.

Yeah, six dimensions.

Bigger. Better than the fifth dimension. Yes.

Oh boy.

Okay, so basically so, so if you just take a matrix and you put together, you know, the jobs from company A and company B and you're evaluating what they do, you could be missing things. Right. So what we want to do is we want to look at those critical dimensions of what makes a job. So there are six of them. There's an article out on the Sales Globe website at salesglobe.com, but just in summary, they are your strategy, your sales strategy, which is, is it selling to new customers, penetrating current customers or retaining current customer revenue? What segments does it work with? Could be customer segments that are say major accounts or middle market or small accounts. Or they could be designated by industry perhaps what offer do they sell? And so if they sell a single product versus they sell a full portfolio of products, you're asking them to do more with a full portfolio. And then you say, okay, we're going to take an acquired company and we're going to merge that together and you're going to sell even more. So you get more stuff in your, in your portfolio and your quota goes up, but you expand the bandwidth out too much and then the job becomes ineffective or less effective with too many, too many products it has to carry. Sales process, same thing. Are they doing lead generation to close to implementation or are they doing some piece of that technical knowledge? So do they have to have technical knowledge about the product or do they get help from somebody like a systems engineer or a sales engineer and then finally management responsibility so some jobs are selling sales managers. So it's kind of a hybrid. So the more you say yes to any of those, the wider the brand width gets and the less effective the job gets. So you need to line those up though, between the two or three or more companies and make sure you're actually comparing on those dimensions.

Yep. So you've got those six dimensions you look at. And then we also ask, you know, and this is data that's readily available from the company is that you look at things like what is the tenure of the people that are in the jobs today, but then also the experience level that you expect. Right. So we look at things that on the job requirements, it's how many years experience? So 3 to 5, 10 to 15. Is there certain schooling or requirements, certifications that you have that, that are needed for that particular role? What are the key responsibilities that they do? So all of that information coupled with the six dimensions of the sales role that you line that out into a matrix and then you can start mapping where jobs are similar and where they are not. And that can help you understand really what you're for looking, looking at. And you know what we didn't talk about? One of the other challenges in these different sales roles is the rules of engagement.

Right. How do they work together?

Yeah. How are they going to work together?

You know, that's a good point because in one company you may have a field sales rep and an inside sales rep and they work together. And in another company may have a field and inside sales rep and they each have their own territories and they actually might even compete. And I've seen it where they even have the same accounts and one sells one product group and the other sells another product group. And so you've gotta make sure those rules of engagement are the same and the job roles are the same.

So you've got rules of engagement questions around the sales roles themselves and then rules of engagements with regard to customers. But because you can also have two companies, happens a lot that are servicing the same customer and in a very different way. So know who the buyer is, know what the sales process looks like, that cycle, sales cycle support.

And one we need to mention as well is talent.

Yes.

So, okay, so you, you've architected what the jobs should look like or how they're going to come together. But then you need somebody to go within those jobs and work within those jobs. Right. So there's a person that performs that job and that requires a certain type of sales DNA as we call it. Right. So the DNA for a Doberman or a hunter is going to be different than the DNA for, say, a retriever or what you might call a farmer or a collie, you know, which is protecting the base. Right. So different DNA pools. But even in the same job category, an account manager in one company might have a different DNA than account manager in another company. And you're trying to merge them together, and you've got like a whole pack of dogs that are. That are dissimilar. Right. So you've got to figure out what's the optimal profile that we're really looking for, because you're probably going to be doing some of this rationalization and looking for synergies. You have to decide how you're going to make those selections, too.

Yeah. And I just like to clarify for those that do not understand, understand or know about Sales Globe's approach to defining the sales roles, Mark isn't calling everybody a bunch of dogs right now, just.

To be clear, the technical term is the canine model.

The canine model. And really what that simply is is we talk about hunters and farmers, and you like to say the hunter, farmer.

Is too black and white. It's too binary. I mean, you got a hunter and a farmer, and the hunter could get tired and become. Could become a rancher. Right. But that's all you got. Hunter, farmer, rancher. But there are. There's an amazing array of canines, right, that describe sales roles. You got, you know, the ones we described there. You've got pointers, you've got, you know, retrievers, you got specialists.

Right, Do.

Yeah. So. So, right.

So for more about that, what your CEO needs to know about sales comp. All right, so we got a little bit into rules of engagement, talent. And I think when we talk about the role matrix, what we just want to look at is what is the type of DNA that you expect from that role. We'll talk about the people a little bit later when we talk about pay. But this is on the matrix. You're looking at what the inventory looks like across those roles. But you're really saying instead of looking at the individual level, you're looking at the role level, the title, the role responsibilities, the dimensions, what you expect out of that. And so once you do that, then you can understand a little bit more about why there may or may not be differences in those roles. And then specifically, we'll talk about pay, because that's our next, next big area.

We want to address pay. Everybody's an expert, but everybody needs some advice.

That's exactly right. Oh my. So the big things that we see across the organizations is for assumed and then sometimes it's not assumed you've done your role matrix, but we see overall pay differences. So the total pay is just different. That's one piece. Another piece we see is that the pay mix may be very different for similar roles. And pay mix, which is really just the percentage of base pay to incentive at target. And target we know is total target compensation at quota. Right. So we know that there are pay mix differences and that can be really significant when you look at, you know, presumed similar jobs. And one may have, you know, a pay mix that we would call a highly leveraged role, which would be one that has, let's say it's 50% of your total target compensation. And 50% is actually pay at risk versus a role that's less highly leveraged as we like to call. And that might be something like 80, 20 or 90, 10. Right. So that can be very different across jobs and then finally the jobs that are presumed to be similar and then finally incentive plan differences. So you've got those three things that can impact the same role across different companies.

Yeah, and the pay mix is critical, it's not an academic thing because paymix is the single biggest driver of behavior in the compensation plan. So if you had two account manager jobs in different companies and one was like you said, a 5050 mix, the other was an 8020 mix, you're going to have two different types of behavior. The 5050 mix is going to be probably more aggressive, more Doberman like behavior. And the 8020 mix is going to be probably more retriever, account manager type behavior. So we put those two together in the same job. You're going to get two different types of performance which you don't want. You want consistency.

Right. So then, you know, let's talk about some things that you can do. So we talked about those three different things that can happen with presumed similar roles. You've got pay differences, overall pay, the pay mix differences, and then incentive plan. So the first thing we say is don't do anything until you've done your role matrix and you've understood what it is that you're really dealing with, what jobs are really alike and what are not. And then we also would have them kind of look at what does that new sales organization, what is that going to look like? So I think you want to address those things before you just go in and randomly change the page.

So you've got to have it planned ahead. You have to keep in Mind that the, the role design is going to be the foundation for the compensation design.

Yes.

And then you mentioned pay competitiveness or differences in pay levels. The reason you want to plan ahead on this is so that you don't get caught behind when the acquisition goes final and the new, new organization is operating. Because what happens? Well, competitors are. They're lurking around.

They're waiting.

They're waiting. You know, in the skies, there are those little black spots you see in the skies circling above your organization. In fact, I saw one example which I thought was really colorful. Just a couple of years ago, it was a call center, I think it was in Texas. And the competitors had actually put up billboards near the call center about their organization and their great jobs and great pay. Right. So they're going directly after the people as they're driving to work.

Right there.

Back when people used to go to work.

Yeah. No shame there, huh?

Yeah. No, no.

Yeah, that's pretty funny.

Great, great, great tactic.

Yeah. So the other thing that we, we really do recommend or encourage is, John, before you even change pay would be look at the performance. So run some analytics and really understand what you're dealing with. Because these blanket pay increases that, you know, a company may be compelled to do may not be appropriate. So are you really going to raise the pay significantly of poor performers, for example? So we ask people to do some due diligence around just what's the data telling you around the people, and then you can really look at pay treatment.

Yeah. So you're connecting all those pieces together. Then you're connecting together your organization and role design with the talent that you need, with the pay that's going to be driving that.

Yeah. So there's a lot to think about. So in summary, we discussed that there are a lot of challenges in M and A for a sales organization. And there's more information. In fact, we have an article that we just released that's on our website. It's called the urge to merge and things you can do about it. And we've also got those six dimensions of the sales roles. So anything that you can do around doing diligence in advance of a. Of that merger, acquisition closing would be really the number one piece of advice we would give any sales leader and manager. And then just that whole role calibration piece, don't underestimate that before you jump to a lot of conclusions around what you should do next. So it's, it's quite a.

So, so then basically be ready, look at it and you're in your diligence, don't miss the whole sales implication, and then be ready when the whole thing goes live so that you're not caught in a bad position.

That's it. So thank you, everyone, for joining us today. Mark, thank you for your insight as well.

Well, thank you, Michelle.

Yeah, you're welcome, Mark. So, anyway, we really appreciate all of you for listening today and hope that it was helpful. And we will see you the next time.

All right.