Don't Let Uncertainty Destabilize Relationships During M&A Activity
By Christoph Schell, President of the Americas Region, HP Inc.
When it comes to growth, companies have two choices; try to grow organically or acquire the products, market share, geographies, and talent to expand and improve profits through a merger or acquisition. Generally the latter is the quickest route. For that reason, a strengthening economy in 2015 saw global deal making reach record levels of $4.7 trillion in mergers and acquisitions, beating the 2007 record of $4.4 trillion.
But despite the high hopes for mergers or acquisitions to help reshape a company’s direction and strategy, many deals do not live up to expectations. In fact, research indicates that, overall, the success rate of merger and acquisition activity is about 50 percent with failure generally attributed to “dropping the ball on the integration process.”
Furthermore, even before the deal is closed and the formal integration process begins, speculation and uncertainty among partners and customers can lead to disruption and loss of business.
Keep Momentum In The Channel
The uncertainty over future revenue and profit-sharing that comes with the announcement of a merger or acquisition can cause uncertainty among channel partner relationships, creating an opportunity for the competition. Partners need to have confidence in making product or solution recommendations to existing and prospective clients and a merger or acquisition raises doubts about the longevity and support of current vendor offerings. Customers will ask questions; channel partners need to be prepared with answers.
For these reasons, being as transparent as possible throughout the deal process — from announcement to closure and through integration — is critical. Delaying communication until every aspect of the merger or acquisition is clear can only cause more unease.
Because 20 percent of partners generally make up 80 percent of sales, the likelihood is to share as many details as possible with top-tier partners, focusing less attention on the smaller ones. While business demands dictate larger partners need to know about important changes, smaller partners should not be left out of the loop. Left with a lot of questions, they may think the worst and shift the conversation to competing solutions when talking to customers.
Shore Up Communications
Effective communication begins by defining the value proposition of the deal relative to the interests of your customers in each tier. Every account manager or sales representative needs to reach out to their customer and partner contacts, conveying the vision and merits of the deal along with any other information necessary to ease concerns and retain trust. When channel partners and vendors work together, they become allies in conveying the value of the deal to their customers.
Channel partners should address how the merger or acquisition will affect business and the potential for increasing revenue. If changes are anticipated, channel partners need to know what they are and why and when they will happen. It’s important they understand how the merger or acquisition is going to affect relationships they have built with their customers.
A written communications plan and timeline ensure information is delivered on a regular basis. Content and activities need to align to the needs and preferences of the various customers from the time the deal is announced through the integration process.
Among communication activities, quarterly conference calls, webinars, update emails, and newsletters all are effective ways to keep partners and customers engaged and supportive throughout the merger or acquisition. Communication also should include information that will help channel partners address customer issues and concerns.
Once the merger or acquisition is complete, communication needs to continue to keep channel partners focused and to control the rumor mill. And the communication should not be one way. Listening to concerns and asking for feedback is as important as delivering messages.
Consistent communication among the entire channel ecosystem is critical during a merger or acquisition to stay top of mind and protect existing revenue streams. Companies may not be able to share everything, but it’s important to share as much information as possible to give channel partners the confidence to continue to drive customer demand.
Christoph Schell is President of the Americas Region for HP Inc. In this role, Christoph is responsible for the go-to-market strategy and overall financial performance of the Americas business across all products, services and go-to-markets. Reach the author at @christophschel.