Achieving revenue synergy after a merger or acquisition can be challenging. The sales function is among those areas for which it is important to look carefully at dissimilarities and ensure that they are resolved in ways that protect and positively impact the bottom line.
We recently worked with a financial technology firm as it closed on a large merger to create a potential juggernaut in the fintech world. Significant revenue synergies were created in year one through the pairing of Company A’s historical strengths in legacy banking technology with Company B’s depth and breadth in next-generation digital payments.
In year two, one immediate – and daunting – challenge was to rapidly design and implement a sales compensation model that could create a pipeline of synergistic revenue opportunities to set the new company up to maintain its success going forward.
The challenge of integration turned into a journey of discovery and problem solving that ultimately merged two sales organizations with conflicting philosophies and polar-opposite approaches into a single cohesive and successful unit. Doing so required the newly merged company to overcome sizable challenges around the size and frequency of the deals each of the legacy sales groups typically pursued, the types of companies targeted, the quota-setting process, and the deal review practices.
Challenge #1: Infrequent Large Deal vs. Frequent Small Deal Orientation
While both sales teams targeted similar accounts, their action plans diverged due to differences in the size of deals pursued, the target buyers’ jobs, and how accounts were used as distribution channels. While one company was targeting infrequent large deals, the other was pursuing a larger number of smaller deals in an effort to “land and expand.” This created challenges in cross selling for the new organization, including confusion over which buyers to address and which sales resources to utilize.
We recommended a sales coverage model that would help the new team make its numbers. During this process, we teamed up with our client to:
- Review the current segmentation structure for the direct salesforce.
- Evaluate the density/dispersion of sales resources and the performance of various segments.
- Analyze large accounts and deals that required multiple participating roles to understand the sales cycle, required resources/roles, impact of each role, success rate, and success criteria.
- Map the optimal sequence of activities to identify, discover, and close sales opportunities.
Based on this information, the last step was to compare the current practices against the optimal sales process to understand how the team could implement the desired model.
Challenge #2: Enterprise-Level vs. SMB-Oriented Sellers
While one legacy sales team had focused on enterprise-level selling, the other had been targeting small business services. When the teams combined and attempted to cross-sell, one all-too-common issue was too many people calling on the same account and negatively impacting the customer experience.
We addressed this challenge through role design in order to clarify and redefine the responsibilities of the sales and sales-adjacent roles. We worked to:
- Develop “from-to” statements that outlined the behaviors needed to improve efficiency in sales and account management.
- Align desired efficiency behaviors with the merged entity’s values and culture.
- Outline how key information and knowledge should be communicated and acted upon.
This process of role design and clarification resulted in the formation of enterprise, small business, and overlay sales specialist teams to cover the market thoroughly but efficiently.
Challenge #3: Target as Stretch vs. Target as Target
Performance results were as different for the two original sales teams as their philosophies and processes. Company A’s sales performance had often come in below quota, while sales at Company B often exceeded quotas by a large margin.
For the newly merged entity, this presented an opportunity to establish a new quota-setting process that could offer long-term benefits for the morale and performance of the sales team as well as the company’s financial results. We employed in-depth data analysis to uncover the quantitative and qualitative realities of rep performance that looked at:
- The shift in distribution curves between the two companies
- Variability in actual rep performance vs. perceptions of performance
- Turnover rates, particularly following the acquisition
Based on this evaluation, on-target earnings were rebalanced through mix adjustments, merit increases, and commission rate changes. Over-achievement payout curves were also adjusted.
Challenge #4: Limited vs. Extensive Deal Reviews
Company A typically performed deal reviews on some of their largest deals on a quarterly basis, while Company B had performed monthly reviews on a very large number of deals. Both processes had problems. Due to poor governance, Company A’s reviews were viewed as contentious and inconsistent. The frequency of Company B’s reviews, on the other hand, were diminishing sales team morale and had come to be viewed suspiciously as a management tool for reducing sales compensation costs.
The approach we took was to strengthen the processes and rules for developing deals so that reviews could be minimized. Actions taken included:
- Tightening and clarifying the terms and conditions for approvals, commission discounting, and review triggers.
- Updating roles and decision rights for sales, finance, sales ops, and human resources.
- Outlining the objectives of the deal desk, where complex high-value deals were discussed, including establishing discounting and price book criteria.
- Ultimately, manager authorization levels were reframed so that only the most vital deals are now reviewed.
A Powerful Outcome
When a newly combined team faces such a wide divide, leadership can move one team toward the approach of the other, meet in the middle, or follow the strategy that ultimately prevailed — taking the best practices from each. Leadership recognized that no single approach to sales would satisfy its complex post-M&A client base and the integrated sales team would require the support of the best practices and people from both systems to turn revenue synergies into sustainable financial reality.
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