Acquisitions are made for a wide variety of strategic reasons – for example to gain technology or human capital, or to increase market share or market access. But in most cases the true value of an acquisition is gained through access to the customer base of the acquired company.
And yet an objective assessment of the strength of acquired customer relationships is almost entirely absent from conventional M&A due diligence processes.
An American multi-national process automation company bought a European player in an adjacent market space and only discovered when its integration processes went badly off track that customer relationships were contentious, that long-standing problems had gone unanswered, and that for many customers the impact of the acquisition was the last straw. For this acquiring company, a poor customer experience proved to be a blind spot that ended up destroying a large part of the value of the acquired asset.
Integration processes are highly complex, and in large businesses they require a robust and repeatable framework to ensure that the value of the acquired asset is protected as the acquired company is brought on board, while still maintaining speed and efficiency. Bringing the customer experience perspective into that framework offers a number of clear benefits:
- Gets key customer interaction information to the integration work-stream teams in a highly actionable form, reducing the time and resources required to make effective integration decisions
- Helps the integration team prioritize its efforts based on a fuller assessment of customer risk and reward, and allows teams to coordinate efforts that cross multiple work streams, thereby reducing duplication and rework
- Provides objective insights into the state of the relationship by talking directly with the customers and / or partners of the acquired company
- Highlights good practices from the customer perspective, which need to be maintained during integration
- Creates early engagement and participation from the acquired company employees and their customers, showing them they have a voice in the new relationship
- Establishes a repeatable process where framework components can be emphasized or de-emphasized depending on the nature of the particular acquisition
A key learning from our own work is that speed matters. While it may not be possible to initiate customer experience due diligence until a deal has legally closed, at that point every day counts, because the sooner the relevant information can be brought to the integration teams, the more actionable and thorough your team can be in its integration activities.
In another technology industry acquisition the customer experience delivered by the acquired company was shown to be excellent, particularly in respect of the technical support provided to its customers. However, this was being achieved through a network of long-standing and very hands-on personal relationships, an approach that would clearly not scale as the company became part of a larger business. Having visibility of this fact early in the integration allowed the acquiring company to address the issue directly and manage it without damaging relationships.
So, understanding customer experience and loyalty (or customer delight) is key to the overall success of an integration project and to protecting the value of an acquired asset. Customer experience need not be an M&A blind spot indeed, in our experience, if addressed early and with the right tools, that understanding can become the foundation for success going forward.
CustomersFirst Now (CFN) has been refining our CX solutions for more than 40 years working with and for many Fortune 100 companies. We provide the only proven, predictive process that links Customer Delight to financial performance by incorporating and measuring CX Best Practices across all key business disciplines. For more information contact Kerri K. Nelson, CEO & President, at firstname.lastname@example.org