The period immediately following the close of an M&A deal is a fragile one for customer relations. If you don’t address misgivings and fears, you could face substantial customer attrition — and imperil the value of your acquisition. Learn why customers depart following a merger and how you can create a plan to prevent it.
Know the pressure points
There are as many reasons for cutting ties as there are companies and customers, but several themes emerge time and again:
Personal ties. If customers had a longstanding relationship (particularly if it involved friendship or family ties) with the previous owner or employees, they may not extend their loyalty and goodwill to the company’s new personnel.
Service disruption. During the merger process, salespeople may leave, ordering and fulfillment processes may be in flux and customers may experience service disruptions. Some customers simply don’t have the patience or can’t afford to stick around until things stabilize.
Lack of communication. Similarly, customers may remain loyal as long as they can anticipate and plan for change. But if the current and future owners fail to keep them apprised of the merger’s progress, customers may start seeking alternatives.
Competition. Your competitors know how chaotic the integration process is and may take advantage of this period of disorganization by trying to lure away customers.
Resistance to change. Some customers simply don’t like change — they may even have been hostile to the merger. These customers typically aren’t happy having to deal with new contacts, new products and, possibly, new prices.
Plan of attack
So you probably won’t be able to retain all of your acquisition’s customers. But even if some are waiting to jump ship at the slightest provocation, work to keep as many on board as possible. This means having a detailed retention plan — with a list of key threats and response strategies as well as employee assignments and timelines — ready when your M&A deal is announced.
Perhaps the most important element of the plan is communication. As soon as possible, you and your seller should inform customers of the impending merger and explain what they can expect in the near term. To take a real-life example, although DIRECTV and AT&T are still waiting for regulatory approval, the companies’ websites provide facts about their merger and promise quality and continuity to customers.
Explaining the reasons behind the deal is important. However, most customers will be more interested in their own relationship with the selling company and yours. For example, will they have to work with a new sales rep? Will they have to file new paperwork or open a new account? Will office or production facility locations change? Prepare your answers carefully, because the “wrong” response to any of these questions could provide customers with an excuse to go elsewhere.
Inform customers about the upside of your merger by touting such benefits as expanded product lines or new services and provide as much detail as you can without making promises you don’t know whether you can keep. In the meantime, make sure that your seller continues to offer excellent service while waiting for the deal to close.
The clock starts now
Timing is critical when it comes to retaining customers. As soon as deal negotiations get underway, you need to start preparing to serve your seller’s customers. Work closely with current sales and customer retention staff to determine important customer relationships and develop strategies for keeping them.
Sidebar: How to hold on to key people
One of the best ways to retain an acquisition target’s customers is to hold on to successful sales, marketing and customer service staff. This is becoming increasingly challenging as the U.S. job market strengthens and many companies offer top dollar for skilled people.
There are several ways to retain key employees:
Financial incentives. Know what your competitors are offering and be prepared to best such offers. Keep in mind that, in addition to salary, your compensation package can include bonuses, stock options, retirement plans and extra vacation days.
Leadership roles. If your own company’s salespeople and product managers continue to rule the roost even after the organizations have merged, ambitious employees from your target company won’t have much incentive to stay on. So be sure to reserve some leadership roles for managers from the acquired business and provide other opportunities to acquired employees for career advancement.
Stability. Will the new employees continue to work out of their current offices? Will their salaries and benefits remain the same? Minimizing disruption to employees’ lives can help you hold on to them.
Even if you can’t prevent employees from leaving, noncompete contracts may prohibit them from directly soliciting your customers.
© 2015