Sales in M&A: Harvard Sales Expert breaks down how to screen and integrate Sales organizations

Sales is often the last consideration when it comes to a successful merger or acquisition. Frank Cespedes, Harvard professor and internationally recognized Sales expert, breaks down why that is a huge mistake - and how we can fix it.
Frank Cespedes Fintalent Podcast
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This post is a summary of our interview with Frank on our podcast. You can listen to the full episode here:

Sales means growing the asset

Mergers and acquisitions are a strategic bet on the future growth potential of a company. Usually, this means profitable growth.

Profitable growth, in return, comes out of the Sales department’s performance.

That’s why the Sales processes, leadership, and people, have to be a critical part of any acquisition or investment – during due diligence, but especially during the integration process.

“I don’t really care if we call profitable growth Sales, Business Development, or asparagus. But it typically means acquiring more customers.” 

Frank Cespedes, senior Harvard lecturer and author of “Sales Management That Works”

In the due diligence process, we can already identify if the Sales organization is set up for future growth potential.

Due Diligence in Sales: How to identify a winning Sales organization

While Sales numbers are a critical aspect of any due diligence project, the sales processes and systems are often less so.

This is ironic, given that the people and processes behind the numbers actually drive the future growth potential.

Sales = costs

In most organizations, Sales and Marketing are the biggest cost factor, equal or even bigger than product development.

So assessing a commercial organization means understanding if the cost structure of a potential M&A is actually worth it. Another reason why it deserves more attention.

The weakest link in sales: Strategic management

Over his long career, Frank has come to appreciate that doing the fundamentals right is a key driver of success.

One thing most people underestimate is how far you can go by doing the basics better than the others.

Frank Cespedes

That’s why he’s advocating to take a step back in the due diligence process – and analyze why we are doing the merger in the first place.

With that strategic direction in mind, we can then assess what parts of the sales process need special scrutiny.

For the Harvard professor, two aspects of the process stand out.

The Hiring Process

There is a mind-boggling 10-40% correlation between interview ratings and on-the-job performance in sales. In other words: Statistically, a coin flip would be a more reliable sales recruiter.

So to judge future growth potential, we have to assess the hiring processes and their efficacy. The most effective sales hiring processes have proven to be inter-departmental ones, especially with customer service and product teams – they will have to deal with the clients later, and they seem to be more reliable in assessing the potential of a given sales hire.

Training in Sales: The big budget sink

Sales trainings account for, on average, 20% higher per-capita training costs than other functions.

Given the complexity and changing nature of sales, this is understandable – but it is often not accounted for in the due diligence process.

Without effective learning processes, the sales organization cannot stay successful.


Post-merger integration: How to effectively bring together different sales organizations

I asked Frank how to merge two different sales organizations after a transaction. His reply was simple:

Don’t. Think about what you’re doing first.

Sales is a highly behavioral discipline, so just merging sales organizations is bound to be a disaster. Instead, analyze the different product lines, and understand how you make both organizations learn from each other.

Product portfolios: The pitfall of sales

A key competency of a salesperson is to understand the product and its benefits for the customer.

When selling a newly acquired solution, this can easily end in disaster.

Instead, the focus should be on creating a learning organization.

Studies show that modeling behavior is the most effective way to learn, and that holds true for sales as well. Making salespeople learn from their peers is a key to unlocking that during the integration process.

Are algorithms the new sales managers?

More and more tools fuel the hunger for data from management. But will the sales manager of the future be an algorithm?

Frank doesn’t think so.

Sales is becoming more transparent across departments. But good data is about asking the right and most important questions. And the most important questions after a merger or acquisition are not “what does that number tell me”, but “how does that number align with the strategic direction behind the transaction”. 

You can buy Frank’s newest book “Sales Management that works – How to sell in a world that never stops changing” on Amazon or wherever you buy your books. Listen to the entire conversation on the OpenIC – the Fintalent podcast.

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The Wall Street Lab Podcast

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