When one company acquires a smaller entity or engages in a merger of equals, it’s important for both sides of the organization to come to the table and outline how said merger will impact everything from people, systems, brand, products, and services all the way down to real-estate.
When companies merge, they can make seemingly minor changes that can make a big difference to customers, causing even the most loyal ones to reevaluate their relationship with the company. A number of studies have found that more than half of all mergers fail to deliver the intended improvement in shareholder value. Customer defections contribute to that high failure rate.
I’ve been part of integration teams for the acquiring company and on the other side where my company was being acquired. But the most eye-opening experience is the impact of an M&A as a consumer.
Years ago, my favorite tea brand was acquired by a larger brand. At first, the packaging changed to reflect a move to the acquiring company’s brand name and color palette. But over time, I noticed the flavor of my daily treat took on a more bitter taste and what was once my favorite tea became a mere souvenir and I gave up buying it soon after.
If you were a loyal customer to let’s say…an airline company, and if that company is going through an M&A with another airline, would you expect your flight routes or booking experience to be affected? How about your mileage program and your hard-earned Elite status? Would you accept losing those privileges?
Systems, Platforms and Application Considerations
Customer experience is an often an overlooked aspect of mergers and acquisitions. While every M&A transaction is unique, they all involve rationalizing and integrating IT systems, platforms, and applications that have critical impacts on products, services, and customers. The most commonly discussed M&A issues tend to be operational alignment, consolidation, and economies of scale, but what about the possible effect the transition has on customers? Shrinking customer loyalties may mean the newly merged business is worth less than the sum of its parts.
When a company integrates an acquisition or engages in a merger, the sooner business applications and data integration teams are involved, the smoother the integration is likely to be. Why? Because data is central to pre-merger analysis and efficient post-merger integration. Data helps not only with keeping the business running but also maintaining and improving customer experience post-acquisition. During a merger or acquisition, you combine customer bases with distinct experiences and unique expectations. Data should be used to make some of the key decisions in the M&A process such as whether to keep existing brand names, products, business processes or even pricing and selling channels based upon customer perception of value on each side of the pond.
Whole Foods acquisition by Amazon and the decision to drop prices right out of the gate is an interesting move and undoubtedly driven by data. Time will tell if this M&A is a success and whether or not customers remain loyal to the brand.
Facing the Customer Data Hurdle
One of the most challenging obstacles to M&A activities is the inability to get clean, reliable, relevant data in a timely fashion from the IT systems of both parties — much less analyze it within the legal and time constraints of the pending transaction.
One way of bringing together customer data from both parties in a speedy fashion is to use a data lake and modern integration platform. The flexibility of the data lake allows IT teams to bring in customer data from both sides in its existing format and perform binding at a later stage. This flexibility makes it possible to quickly reveal trends and correlations across disparate customer datasets that are crucial to projecting benefits and impacts of an M&A transaction on customers.
In this data lake design, customer information is combined into a common location for the teams to assess synergies and overlaps. To facilitate the convergence of data, seamless data cleansing and master data management (MDM) built into the lake is used to clean, enhance, and uncover relationships across hundreds to thousands of customer data sets and attributes.
In a post-merger scenario, the consolidated data forms the basis for the deployment of new, data-driven enterprise applications, and is pushed back down to data warehouses and legacy systems in the operational divisions of the newly merged company.
As an example, Johnson Controls, a manufacturer of intelligent buildings, efficient energy solutions, integrated infrastructure and next generation transportation systems, recently acquired Tyco, a global fire and security provider. The goal of the acquisition was to create solutions to power smart buildings. There was a real need to make more of their data accessible to more teams so that everyone could benefit from the unified view of the customer in order to provide better products and services.
In their quest to create a 360-degree view of its customers, Johnson Controls built a global data lake, integrating information from over 200 ERP and CRM systems across the enterprise. Now, employees from finance to sales, product development to fraud detection, can access this data lake to retrieve the most up-to-date information about a customer at any time. JCI can now imagine future services to enrich its solutions, and drive profitability.
One of the biggest challenges throughout the M&A process is not only to keep business uninterrupted but also to keep customers engaged. Unlike business assets, customers cannot be bought or sold in the same way. The hope is that when an acquisition is made, customers come along too. It just can’t be taken for granted.