Capturing Cross-Selling Synergies in M&A: Strategies for Success

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Jul 22, 2023

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Capturing Cross-Selling Synergies in M&A: Strategies for Success

Cross-selling is a powerful strategy that can unlock significant revenue synergies in mergers and acquisitions (M&A). However, it requires a deep commitment and understanding of the opportunity and how to execute on it. While cost synergies are more straightforward to estimate and often pay off quickly, capturing revenue synergies is essential to meet shareholder expectations. In this article, we will explore the importance of cross-selling in M&A and discuss actionable advice for successfully capturing cross-selling synergies.

Cross-selling involves delivering products and services traditionally sold to one set of customers to another set of customers. On average, there is a 20 percent gap between the cross-selling goal and the actual result, and it takes three to five years to capture the majority of synergies. To increase the odds of capturing the cross-selling opportunity, M&A teams should focus on the "six Cs": complementarity, connection, capacity, capability, compensation, and commitment.

Complementarity is a crucial factor to consider when evaluating the cross-selling potential between two companies. How well do their accounts, products, and services complement each other? While M&A teams can generally evaluate overlap in customers or products, they often overestimate the potential complementarity of products. It is essential to conduct a thorough analysis to identify the true complementarity and potential synergies.

Connection, or strong customer relationships, is another key consideration for successful cross-selling. The difference between having a strong relationship with the account and with the specific buyer can significantly impact success. M&A teams should assess the strength of customer relationships and determine if there are opportunities to build on them for cross-selling.

Capacity refers to the ability of the salesforce to focus on cross-selling. It is crucial to ensure that the sales team has the bandwidth and resources to dedicate to cross-selling efforts. Without sufficient capacity, cross-selling initiatives may not receive the necessary attention and effort to be successful.

Capability is equally important as capacity. Does the salesforce have the skills required for cross-selling? It is essential to assess the sales team's capabilities and provide training and support where necessary. Building the necessary skills for cross-selling can significantly enhance the success of these initiatives.

Compensation plays a critical role in motivating salespeople to prioritize cross-selling. However, compensation alone is not enough. Success requires coupling a well-calibrated compensation plan with the right recognition programs. Nonmonetary incentives are also crucial in spurring salespeople to make cross-selling a priority.

Commitment is the final and most significant factor among the six Cs. It has the highest correlation with overall program success. The company must demonstrate a strong commitment to cross-selling initiatives from top to bottom. Without commitment, it is challenging to overcome obstacles and achieve the desired results.

While capturing cross-selling synergies can be a complex undertaking, there are actionable steps that M&A teams can take to increase their chances of success:

  • 1. Conduct a thorough analysis: Evaluate the complementarity of products, assess customer relationships, and determine the sales team's capacity and capability for cross-selling. This analysis will provide a strong sense of the cross-selling opportunity and guide the execution strategy.
  • 2. Develop a comprehensive training program: Invest in training and development initiatives to equip the sales team with the necessary skills for cross-selling. Provide ongoing support and coaching to ensure continuous improvement.
  • 3. Foster a culture of cross-selling: Create a culture that values and rewards cross-selling efforts. Implement recognition programs and nonmonetary incentives to motivate salespeople to prioritize cross-selling.

In conclusion, capturing cross-selling synergies in M&A can be a game-changer for companies. By leveraging complementarity, building strong customer connections, ensuring capacity and capability, implementing the right compensation and recognition programs, and demonstrating unwavering commitment, organizations can increase their chances of realizing significant revenue synergies. Taking the time to evaluate and execute on these factors will pave the way for long-term success in cross-selling initiatives.

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