Capturing Cross-Selling Synergies in M&A: TikTok's Future and Learnings from China

Hatched by Kazuki
Aug 15, 2023
4 min read
4 views
Copy Link
Capturing Cross-Selling Synergies in M&A: TikTok's Future and Learnings from China
In the world of mergers and acquisitions (M&A), capturing cross-selling synergies is a crucial aspect of maximizing post-transaction revenue. While cost synergies are often more straightforward to estimate and quickly pay off, capturing revenue synergies is essential to meeting shareholder expectations. One powerful way to achieve revenue synergies is through cross-selling, which involves delivering products and services traditionally sold to one set of customers to another set of customers.
On average, the gap between the desired cross-selling goal and the actual result is approximately 20 percent. It typically takes three to five years to capture the majority of synergies. This article will explore the key factors that can provide a strong sense of the cross-selling opportunity in a merger and increase the likelihood of success.
The "six Cs" framework is a valuable tool for evaluating the potential for cross-selling synergies. These six dimensions include complementarity, connection, capacity, capability, compensation, and commitment. By systematically focusing on these dimensions, organizations can outperform those that overlook or neglect them.
Complementarity refers to how well the merging companies' accounts, products, and services complement each other. Evaluating this aspect requires a deep understanding of the market and customer needs. Connection, on the other hand, emphasizes the strength of customer relationships that can be built upon. It is crucial to recognize that a strong overall relationship with an account does not necessarily translate to a strong relationship with the specific buyer. This distinction can significantly impact the success of cross-selling efforts.
Capacity and capability involve assessing whether the salesforce can effectively focus on cross-selling and possesses the necessary skills. Sales leaders must understand the relevance of new products to decision-makers and work on building credibility and trust in the new space. Compensation, although important, is not sufficient on its own. Success in cross-selling requires a well-calibrated compensation plan coupled with the right recognition programs. Nonmonetary incentives also play a critical role in motivating salespeople to prioritize cross-selling. However, commitment stands out as the dimension with the highest correlation to overall program success.
While M&A teams can evaluate customer and product overlap, they often overestimate the potential complementarity of products. This oversight highlights the need for a comprehensive evaluation that goes beyond surface-level analysis. Furthermore, the ability to make early progress on cross-selling initiatives is crucial for building momentum and sustaining the program's success.
Moving beyond the realm of M&A, we can gain insights from TikTok's success in China. According to internal studies, 40% of young people prefer TikTok or Instagram over Google Maps or Search when looking for a place to eat lunch. This statistic highlights the power of video search and the potential for in-app commerce. Mastering video search can unlock opportunities for monetizing user intent and expanding into lucrative features such as commerce, payments, and the consumer wallet.
TikTok's algorithm-driven platform boasts over a billion global monthly active users, with kids and teens spending an average of 91 minutes per day on the app. This engagement surpasses the average of 56 minutes per day spent on YouTube. Imagine the possibilities if every user-generated video content had a location tag that could redirect to a voucher or deal. Merchants would benefit from a vast number of free and seemingly less-biased user-generated "ads" for their products, courtesy of their own customers.
In China, the sister app Douyin has already made search a mainstream and popular behavior. Thanks to algorithms and user behavior, Douyin can push new places to users that they would never have thought to search for. Short video content enables continuous discovery of the best places around the user, improving with every swipe as the platform better understands their interests.
Incorporating these insights, here are three actionable pieces of advice for capturing cross-selling synergies:
- 1. Conduct a comprehensive evaluation: Look beyond surface-level analysis and evaluate complementarity, connection, capacity, capability, compensation, and commitment. Understand the market, customer needs, and the strength of existing relationships.
- 2. Focus on early progress: Building momentum from the start is crucial for sustaining cross-selling initiatives. Identify quick wins and prioritize activities that generate initial success.
- 3. Embrace video search and in-app commerce: Explore the potential of video search and in-app commerce to unlock new revenue streams. Consider how location tags and user-generated content can elevate cross-selling efforts.
In conclusion, capturing cross-selling synergies in M&A requires a deep commitment and understanding of the opportunity at hand. By focusing on the six Cs and incorporating insights from successful platforms like TikTok, organizations can increase their chances of realizing revenue synergies. Conducting a comprehensive evaluation, focusing on early progress, and embracing emerging technologies and trends are key steps towards achieving cross-selling success.
Resource:
Copy Link