What Makes the Top 10% of Founders Different? - Capturing Cross-Selling Synergies in M&A

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Jul 19, 2023

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What Makes the Top 10% of Founders Different? - Capturing Cross-Selling Synergies in M&A

When it comes to entrepreneurship and mergers and acquisitions (M&A), there are certain qualities and strategies that set the top 10% of founders apart from the rest. In this article, we will explore the common points between these two areas and how they can be connected to drive success. Additionally, we will delve into the concept of capturing cross-selling synergies in M&A and the various factors that contribute to its achievement.

Execution and Formidability: A key characteristic of successful founders is their ability to execute without getting stuck. They have a relentless drive to push through challenges and obstacles, always finding a way to move forward. Similarly, in the context of M&A, capturing cross-selling synergies requires deep commitment and understanding of the opportunity at hand. This requires formidability - the ability to face difficulties head-on and find innovative solutions to maximize revenue synergies.

Clear Communication: Successful founders have the ability to explain what their business does in just a few sentences. This concise and clear communication is essential for garnering interest and attracting customers. Similarly, in the realm of M&A, capturing cross-selling synergies necessitates a strong sense of communication. In order to deliver products and services traditionally sold to one set of customers to another, companies must effectively communicate the value and relevance of these offerings. This clear communication bridges the gap between different customer segments and drives revenue synergies.

Internal Motivation: Top founders possess an internal motivation that keeps them going even when faced with setbacks. They don't get easily discouraged by failures and are quick to adapt and learn from their mistakes. In the world of M&A, capturing cross-selling synergies is a long-term endeavor. On average, it takes three to five years to capture the majority of synergies. This requires internal motivation and resilience to stay committed to the cross-selling strategy, even in the face of challenges and obstacles.

Now, let's delve deeper into the concept of capturing cross-selling synergies in M&A. Cross-selling refers to the practice of delivering products and services traditionally sold to one set of customers to another set of customers. This approach is a powerful way to realize revenue synergies and ensure that transactions meet shareholder expectations. However, it is essential to understand the six key dimensions, also known as the "six Cs," that can provide a strong sense of the cross-selling opportunity and increase the odds of capturing it.

  • 1. Complementarity: The first dimension to consider is how well the companies' accounts, products, and services complement each other. Are there natural synergies that can be leveraged to drive cross-selling? Understanding the complementarity between the merging entities is crucial for identifying the potential revenue synergies.
  • 2. Connection: Building strong customer relationships is vital for successful cross-selling. Having a good relationship with the account is important, but it is equally important to have a strong connection with the specific buyer. This connection can significantly impact the success of cross-selling efforts.
  • 3. Capacity: Can the salesforce focus on cross-selling? It is essential to assess whether the sales team has the bandwidth and resources to prioritize cross-selling initiatives. Without the necessary capacity, capturing cross-selling synergies becomes a challenging task.
  • 4. Capability: Does the salesforce have the skills required for cross-selling? Cross-selling requires a different set of skills and approaches compared to traditional sales. Sales leaders need to understand the relevance of the new product or service to decision-makers and build credibility and trust in the new space.
  • 5. Compensation: While compensation plays a role in motivating salespeople, it alone cannot achieve the desired results. Success in capturing cross-selling synergies necessitates coupling a well-calibrated compensation plan with the right recognition programs. Non-monetary incentives can also be critical in spurring salespeople to prioritize cross-selling.
  • 6. Commitment: Of all the six Cs, commitment has the highest correlation with overall program success. It is crucial for the company to demonstrate a strong commitment to cross-selling initiatives. This commitment builds a sense of momentum and encourages the sales team to make cross-selling a priority.

It is important to note that M&A teams tend to overestimate the potential complementarity of products. While they can generally evaluate overlap in customers or products, the true complementarity requires a deeper understanding. This highlights the significance of thorough due diligence and analysis before embarking on cross-selling strategies.

In conclusion, the top 10% of founders and successful M&A strategies share common characteristics. Execution and formidability, clear communication, and internal motivation are key qualities that set them apart. When it comes to capturing cross-selling synergies in M&A, understanding the six Cs - complementarity, connection, capacity, capability, compensation, and commitment - is essential. By focusing on these dimensions, companies can increase their chances of successfully capturing revenue synergies and meeting shareholder expectations.

Actionable Advice:

  • 1. Foster a culture of execution and formidability within your company. Encourage your team to push through challenges and find innovative solutions.
  • 2. Develop clear and concise communication about your business and its offerings. Make sure your customers and potential customers understand the value you bring.
  • 3. Prioritize internal motivation and resilience. Encourage your team to learn from failures and adapt quickly, staying committed to long-term strategies.

By incorporating these actionable advice and understanding the commonalities between top founders and capturing cross-selling synergies in M&A, companies can position themselves for success in the competitive business landscape.

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