1. Mergers & Acquisitions
How effective assessment helps drive successful M&A activity
M&A scenarios are, by definition, times of great change….
A merger or acquisition is a key transitional phase for both parties. It can frequently be a
troubled time, but the aim is for the combined organization to move beyond its problems in
order to create growth and to reap benefits derived from synergies such as entry to new
markets and cross-selling, economies of scale, the elimination of redundancies and
organisational redesign.
Yet, much M&A activity ends in
failure. Cultural incompatibility is
often cited as the number one M&A
killer, but this is not the case in
reality. Paying too much of a
premium is what kills most mergers
and acquisitions. If the acquirer pays
the right price, there are strategies,
tools and processes which will drive
successful M&A activity. In terms of culture, organisations should focus on real areas of
cultural concern not the cultural background noise.
The importance of talent
Talent is clearly a key aspect in any M&A situation, if for no other reason than because of
the way people respond to uncertainty: such uncertainty impacts customer perceptions and
attitudes.
Going forward, talent needs to be aligned to an organisation’s structure and processes for
the new entity to be able to move towards maximising long-term sustainable growth.
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2. “The turnover statistics associated with mergers and
acquisitions are staggering.”
Moreover, talent turnover is undoubtedly an expensive cost in the context of M&A activity:
typically, companies underestimate turnover costs:
“the real total replacement cost of key people = Annual Salary + Placement/search firm fees
+ Other recruitment/training costs + Cost of time involved in selection process + Cost of time
spent orienting and training a replacement + Cost of lost productivity + Relocation.”
The turnover statistics associated with mergers and
acquisitions are staggering. Based on published data,
when no co-ordinated retention actions are taken, 47% of
all senior managers in an acquired firm leave within the
first year of the acquisition. But the exodus doesn’t stop
there. Within the first three years, 72% end up heading for
the door.
And this is not just a short-term issue. A study1 published in the July/August 2008 edition of
the Journal of Business Strategy suggests that mergers and acquisitions destroy leadership
continuity in target companies’ top management teams for at least a decade following a
deal. The authors found that target companies lose 21% of their executives each year for at
least ten years following an acquisition – more than double the turnover experienced in
non-merged firms.
‘These findings are especially important in light of the correlation between the loss of top
executives and a company’s poor performance,’ said Jeffrey Krug, associate professor of
strategic management in the VCU School of Business and lead author of the study.
‘Companies involved in these deals need to understand the long-term effect on their
executive ranks and they need to find ways to keep key executives on board.’
Thus, retention rate has become a common key metric in the M&A arena. Nevertheless, this
remains a very crude measure. In reality, organisations need to know what talent they’ve
got, and what its strengths and weaknesses are. Suddenly, with the introduction of effective
assessment, a previously fuzzy picture is brought into sharp focus with substantially higher
definition and granularity.
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3. “It’s always the key sales talent who leave first, not the ‘dead
wood’ – an exodus which can cripple a sales organisation”
The importance of sales talent
Sales talent is of particular concern to companies in an M&A context, because the sales
organisation is often the primary interface between the company and its customers.
Uncertainty within the sales organisation soon transfers itself to customers.
What’s more, in any period of uncertainty, it’s always the key sales talent who leave first,
not the ‘dead wood’ – an exodus which can cripple a sales organisation.
In a situation where the acquisition is focused on securing new customers this can negate
the entire raison d’être for the acquisition.
Thus, understanding and then integrating your sales talent and key customer-facing
executives into a merged organisation should be a key consideration in an M&A scenario.
As a result, a reliable and objective assessment tool introduces a whole new level of
opportunity into the M&A equation.
Anecdotal evidence suggests that this opportunity is now being recognised by M&A
professionals: reviewing the sales teams and models of the portfolio businesses is becoming
a new priority as they seek to drive value into these organisations.
Assessment in an M&A context
In terms of talent management, we can view the M&A project lifecycle as dividing into three
distinct phases:
1. Pre-merger - talent due diligence;
2. Immediate post-merger - acquisition of information and implementation of
organisational redesign; and
3. On-going talent management post organisational redesign.
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4. “with the introduction of reliable and relatively speedy on-line
assessment tools there is now scope to focus retention metrics
down to the level of specific highlighted individuals.”
Pre-merger
In the context of 1 (above) there has been little practical scope for organisations to assess
the talent within the organisation they are acquiring as part of any pre-merger due diligence
process. That said, there is increasing commitment to linking key talent retention indicators
to the financial terms of an acquisition.
And, with the introduction of reliable and relatively speedy online assessment tools such as
SalesAssessment.com’s Sales Talent Assessment, there is now the scope to focus retention
metrics down to the level of specific highlighted individuals.
Post-merger
Immediately post-merger, the race is on to understand the structure of the sales
organisation being acquired and the capabilities of the key talent: assessment and
communication are both fundamental to this activity as organisations seek to capitalise on
their investment.
There are a number of key considerations in relation to M&A activity in the context of the
sales organisation.
These include:
 Communicating with the sales organisations
 Communicating with customers
 Integrating
o assessing what roles you’ve got
o assessing what talent you’ve got
o assessing what roles you need
o assessing which talent you should
 retain
 promote
 develop
 redeploy
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5. “Effective assessment of an acquired organisation’s sales talent is only
the start of the beginning of the talent management journey.”
Speed is of the essence, particularly in a sales context: acquiring organisations cannot
assume that top talent will sit tight long enough to be assessed over time as part of a
familiarization process.
Thus, effective online assessment is a clear winner, given that it:
 enables an assessment programme to be implemented and analysed within only a
few days
 only takes a matter of hours to complete an assessment
 can be carried out remotely
 provides an objective view of the talent
 benchmarks talent against a world-class High-Performer (not simply the best in
either organisation)
 provides a clear organisational overview
 provides a development needs analysis for individuals and teams
 signposts who to retain, who to redeploy, who to train and who to develop
On-going talent management
Effective assessment of an acquired organisation’s sales talent is only the start of the
beginning of the talent management journey.
A properly conducted assessment programme offers two major advantages for an
organisation that has grown by acquisition:
1. An external benchmark based on a global sales High-Performer profile enables
companies to measure the capability of their talent on a consistent and objective
basis across the organisation, geography by geography, division by division, and team
by team.
2. The external High-Performer benchmark enables organisations to compare their
talent with the best the competition has to offer, not simply the best in the
organisation.
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6. “In short, Sales Performance dashboard provides an instant snapshot of
who to retain; who to let-go; who needs up-skilling; who needs
coaching; how long and how much is this likely to cost.”
Sales Talent Assessment and associated analysis tools like the Sales Performance Dashboard
and Sales Team Dashboard empower organisations to identify and respond to a whole range
of issues that impact revenue performance:
 Sales Performance Dashboard offers an
objective, high-level read-out of the main
talent management issues for the CEO and
C-suite colleagues.
It identifies High-Performers and those with
the potential to perform at this level, along
with the relevant development programme
needed to bring individuals up to the High-
Performer level.
It provides an excellent indication of the
likely timescale and cost of developing an
organisation based around High-Performers, enabling executives to formulate an
appropriate sales talent strategy.
Furthermore, it also instantly highlights which individuals are likely to be too costly to
develop or retain.
In short, Sales Performance Dashboard provides an instant snapshot of
o who to retain
o who needs skills training
o who needs coaching
o how long this is likely to take
o an indication of the scale of costs involved
o which individuals are unlikely to repay the investment and, therefore, should
be considered for redeployment
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7.  The Sales Team Dashboard provides more detailed insight into the capability of the
sales organization at team level, and thus enables managers to implement the C-
suite strategy.
 The Sales Talent Assessment offers further granularity by providing the facility to drill
down deeper into the performance capabilities and potential of individual employees
in specific sales roles. It provides a detailed but easy-to-interpret assessment along
with a complete development needs analysis for every individual.
SalesAssessment.com’s Sales Performance Insight Suite enables organisations engaged in
M&A activity, to zero in on new and incumbent sales talent at a strategic level. They can
then drill down to focus precisely on implementation of the sales talent management
strategy at team level and that of the individual sales talent.
Sales talent in an M&A context – key points
Talent ground-rules for organisations to follow in an M&A context:
1. Always operate with the assumption that there will be turnover which directly results
from the merger.
2. Plan on taking advantage of the opportunity the merger presents to redeploy
marginal employees.
3. Look for opportunities to consolidate and streamline for a more efficient
organization.
4. Move rapidly to re-recruit your good employees.
1’
The Big Exit: Executive Churn in the Wake of M&As’, Journal of Business Strategy, July/August 2008.
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