Capturing cross-selling synergies in M&A: The Definition of Knowledge and Its Management

Capturing cross-selling synergies in M&A: The Definition of Knowledge and Its Management

Introduction:

Mergers and acquisitions (M&A) are a common strategy for companies looking to expand their market presence and increase shareholder value. One of the key drivers of post-transaction revenue synergies in M&A is cross-selling. Cross-selling involves delivering products and services traditionally sold to one set of customers to another set of customers. While capturing revenue synergies is crucial for meeting shareholder expectations, it requires a deep commitment and understanding of the opportunity and how to execute on it. In this article, we will explore the concept of capturing cross-selling synergies in M&A and delve into the definition and management of knowledge.

The Six Cs of Capturing Cross-Selling Synergies:

To effectively capture cross-selling synergies, M&A teams should focus on the "six Cs" - complementarity, connection, capacity, capability, compensation, and commitment. Complementarity refers to how well the companies' accounts, products, and services complement each other. Connection is about building on strong customer relationships. Capacity questions whether the salesforce can effectively focus on cross-selling. Capability examines whether the salesforce has the necessary skills for cross-selling. Compensation evaluates whether the company provides the right incentives for cross-selling. Finally, commitment is crucial as it has the highest correlation with overall program success. Companies that focus systematically on these six dimensions outperform those that do not by more than 20 percent.

Overestimating Complementarity in M&A:

While M&A teams can generally evaluate overlap in customers or products, they tend to overestimate the potential complementarity of products. It is essential to have a strong relationship with the account and the specific buyer to ensure success. Connection matters! Sales leaders need to understand the relevance of new products to decision-makers and build credibility and trust in the new space. Creating the right focus requires careful orchestration and consideration of precise activity during the launch.

The Role of Compensation and Commitment:

When it comes to capturing cross-selling synergies, compensation alone will not achieve results. Success requires coupling a well-calibrated compensation plan with the right recognition programs. Nonmonetary incentives are also critical to spurring salespeople to make cross-selling a priority. However, commitment has the highest correlation with overall program success among the six Cs. Companies that are genuinely committed to cross-selling are more likely to succeed in capturing synergies.

The Definition and Management of Knowledge:

Knowledge is a crucial resource for organizations and individuals. According to the World Development Report 1988, knowledge is defined as the information for production. However, knowledge is not simply found in books; it is the ability to apply information to specific work and performance. Knowledge is fragmented and needs to be upgraded from time to time. It holds value and interests that cannot be quickly assessed.

Knowledge management is the process of capturing, distributing, and effectively using knowledge. It involves transferring captured information into knowledge and continuously collecting explicit and tacit information. Peter Drucker predicted that knowledge would become the most important factor of production in the 21st century. Therefore, investing in knowledge to accumulate compound interests is crucial.

Actionable Advice:

• 1. Invest in knowledge regularly: Form a habit of learning and continuously update your knowledge base.

• 2. Seek new emerging techniques: Always manage to buy low and sell high by learning and adopting new technologies and methodologies.

• 3. Evaluate and balance your investment: Periodically evaluate the knowledge that deserves your attention and focus on cultivating both general and specialized knowledge.

Conclusion:

Capturing cross-selling synergies in M&A is a complex process that requires a deep commitment and understanding of the opportunity. By focusing on the six Cs - complementarity, connection, capacity, capability, compensation, and commitment - companies can increase their chances of success. Additionally, understanding the definition and management of knowledge is crucial in today's competitive landscape. By investing in knowledge regularly, seeking new emerging techniques, and evaluating and balancing your investment, you can stay ahead and make the most of the knowledge economy.