Many established companies are looking at mergers and acquisitions to enter the Subscription Economy. While M&As were not easy in the old product-based world, they are even more complicated when dealing with subscription companies. For starters, you have all of one quarter or 90 days to integrate the new company. This is your opportunity to tell your customers and the market why you made the acquisition and present the unified company’s overall vision.
Why just 90 days? Because subscription-based companies are by nature customer-centric and always evolving. Take any longer and you risk losing a meaningful and seamless integration which will impact your customer’s experience.
Having led several successful integrations over my career, here’s why it is critical to define the integration strategy and implement in the first 90 days:
Post-acquisition, the parent company is heavily invested in the acquired company during the first quarter in terms of focus, budget, and most importantly in managing change. This is really the right time to spearhead a cross-functional integration program and over-communicate the plan.
Executive sponsorship: All acquisitions are made on the promise of benefits. This could be in terms of adding more revenue, more products, more customers, or even more leads. Everyone in the company, especially executives and investors are eager to realize benefits that validate the investment decision.
Right after an acquisition, there is a strong desire from the executive team to integrate the people, process, and technology as quickly as possible so the company can reap the benefits of the acquisition. This is the time to emphasize your executive sponsorship for integration and make it an immediate priority to ensure alignment across the company.
One vision: Acquisitions impact every department even if it means just a handful of new employees or just one more new product. It’s critical that people are not wasting time on duplicate systems and disparate processes. The sooner there’s alignment, the sooner individuals from both companies will speak the same language, and feel and function as a single entity driven by one unified mission. People are the most critical component of the acquisition and retaining talent should be central to every decision.
Not integrating within 90 days for fear of disrupting the business creates confusion for the entire organization and will ultimately have a negative impact on your business. For example, the lack of proper marketing and sales integration leads to an inability to cross-sell and upsell across product lines and inability to consolidate sales teams and provide incremental pipe.
Anticipation of change: Typically, people on both sides of the table expect change during a merger or acquisition. While nobody likes change, it’s far easier to implement it when people know it’s inevitable. Maintaining status quo and attempting to integrate a year later will be met with a wall of resistance. Simply giving your new employees a different email address and possibly a new laptop means you’ve lost your window of opportunity to set expectations for the change this acquisition represents.
Budget: Ideally, companies will anticipate and budget the cost of integration into the process. If you don’t use it, you risk losing it. In the always evolving subscription world, priorities change and finding resources later to support your integration efforts won’t be easy.
Duplicate systems: The futility and cost of maintaining multiple systems is a strict “no” for any company. It’s not just the cost towards service, it’s also the people you need to maintain them. Most importantly, disparate systems can also lead to bad data, impact revenue and ability to close your books. And that’s a price you don’t want to pay as you look to provide operational efficiency and drive cost reductions.
Reporting: The executive team will want consistent reporting on overall business metrics. It makes most sense to consolidate your data and align on business metrics. It is critical to determine the metrics required to measure the success of the acquisition.
No matter how hard you try to hide it, the lack of internal organizational alignment will eventually be exposed in your customer-facing assets such as your product, sales order, and invoicing.
Ongoing Relationships: In the old product world, the only time you interacted directly with your customer (if at all) was at the point-of-sale. But in the Subscription Economy, you are in an ongoing relationship with your customers. They are always interacting with you – to use your service, to make changes to their accounts, to make payments, etc.
Once a company is acquired, your best chance to educate your customers is within the first quarter. This means that all customer-facing assets including your product and website must look and feel like one single company.
Integrate with No Disruption: Successful subscription companies are those that are completely subscriber-centric and every individual is laser focused on serving the customer and offering seamless and memorable experiences.
It’s vital to integrate processes, systems, and infrastructure with minimal business disruption and avoid missed revenue opportunities and customer dissatisfaction which then results in churn. To ensure business continuity during integration, you must define the current state and future state business processes and chart a phased integration plan to enable business synergy.
Integrating an acquisition is far from easy. But, a well thought out M&A plan is worth your while. It may allow the acquired company to leverage the parent company’s maturity while the parent company benefits from the acquired company’s innovation.
The best way to approach it is to act on it thoughtfully. Don’t be hasty in your decisions to integrate people, processes, and systems. Don’t stall for fear of business disruption and think that you’ll get to it later. If you don’t get to it in the first 90 days, you’ve lost an opportune time to capitalize on the acquisition. After 90 days, ask yourself – Have I met the business case of the acquisition?