Integrating acquisitions into a parent company is always a complicated operation, but it can be particularly challenging with subscription companies with their laser-focus on creating a seamless ongoing experience for subscribers. In this guide, originally published in Forbes, Zuora CIO Alvina Antar shares key strategies to prepare for, execute, and integrate an acquisition.
In today’s Subscription Economy, companies only have one quarter, or 90 days, to integrate a new company acquisition.
Why just 90 days? Because subscription-based companies are by nature customer-centric and always evolving.
Companies that take any longer than 90 days run the risk of failing to execute a meaningful and seamless integration. And a failed acquisition integration will negatively impact customers’ experience — which will have long-lasting, downstream effects.
This short window is a business’s opportunity to tell customers and the market why they made the acquisition and present the unified company’s overall vision.
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 the business. For example, the lack of proper marketing and sales integration leads to an inability to cross-sell and upsell across product lines and the inability to consolidate sales teams to provide incremental pipe.
In the 90 days after an acquisition, parent companies need to focus on company-wide unification and continue to prioritize their customers. Here’s how.
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.
In the first quarter post-acquisition, the parent company is heavily invested in the acquired company in terms of focus, budget, and, most importantly, in terms of effectively managing change. This is really the right time to spearhead a cross-functional integration program and over-communicate the plan.
There are 5 steps to building this early alignment:
1. Emphasize Executive Sponsorship
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.
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. There’s also the benefit of the acquired company being able to leverage the parent company’s maturity while the parent company benefits from the acquired company’s innovation. Everyone in the company, especially executives and investors are eager to realize benefits that validate the investment decision.
2. Establish Clear Goals
The executive team will want consistent reporting on overall business metrics. That’s why it makes sense to move quickly to consolidate data and align on business metrics. It is critical to determine the metrics required to measure the success of the acquisition.
3. Set Expectations For the 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 real and substantial change this acquisition represents.
4. Budget Proactively
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.
5. Consolidate 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, and impact revenue and the ability to quickly and accurately 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.
In the product-centric business model, the only time companies interacted directly with their customer (if at all) was at the point of sale. But with recurring revenue models, companies and customers are in an ongoing relationship. Consumers are always interacting with companies – to use their service, to make changes to their accounts, to make ongoing payments, etc.
Successful subscription companies are those that are completely subscriber-centric and in which every individual is laser focused on serving the customer and offering seamless and memorable experiences.
That’s why it’s especially vital to integrate processes, systems, and infrastructure with minimal business disruption to 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.
Once a company is acquired, the best time to educate customers is within the first quarter. This means that all customer-facing assets — including the product and website — must look and feel like one single company.
Integrating an acquisition is far from easy. That’s why a well thought out M&A plan is so worthwhile. The best way to approach acquisition is to act thoughtfully. Don’t be hasty when integrating people, processes, and systems. And definitely don’t stall for fear of business disruption.
If companies don’t execute integration in the first 90 days, they’ve lost the window to capitalize on the acquisition. After 90 days, executives should ask themselves “Have I met the business case of the acquisition?” With thoughtful planning, committed alignment, a phased approach, and commitment to integration — hopefully the answer will be “Yes!”