Sales force integration is vital.

• Author: Moorman, Michael
• Position: MERGERS

Most CFOs want their M&A deals to result in a simple equation: 1+1>2. In fact, this math is often the primary rationale on which they sell the proposition to the board of directors and shareholders--the deal will result in greater profitable revenues than either company can accomplish alone.

Yet, as we know, many, if not most, mergers fall short of their objectives. Some recent studies put the failure rate as high as 70 percent. This happens for a variety of reasons, such as an inaccurate assessment of the deal's attractiveness, poor integration strategy or weak implementation and execution follow-through.

But one common and often overlooked cause is a failure to successfully integrate the sales forces of the two organizations. Indeed, the integration of the strategies, market offerings, customer relationships and people responsible for generating revenues is well worth a CFO's attention.

According to a 2006 report by Deloitte Consulting, mergers that effectively combined sales forces delivered an average of 19 percent greater revenue growth. These deals also delivered 9 percent greater EBITDA (earnings before interest, taxes, depreciation and amortization) margin growth than industry averages.

Many financial executives overlook or fail to capitalize on the ways they can influence the success of the sales force integration and its part in the overall deal success. Yet, proper sales integration, while complex even under the best of circumstances, may give CFOs the best chance to help the transaction meet revenue synergy expectations.

There are several high-impact ways for financial executives to help the sales force integrate successfully. The insights and observations that follow derive from more than 200 merger-and-acquisition-related sales force integrations that ZS Associates has led over the last 25 years across a wide range of industries and in more than 60 countries.

Balancing Investment And Cost-Cutting

The revenue synergies that compel mergers and acquisitions are situation-specific and typically derive from one or more of the following sources:* combining products or services to create unique solutions;

* cross-selling one company's offering to the other company's customers'

* drawing on the stronger sales leadership of one company to improve sales force performance of the other; and

* reducing excess capacity in the market to make profitable pricing more sustainable.

The CFO must ensure that the company appropriately funds the investments necessary to achieve these synergies while also eliminating unnecessary costs. Practically speaking, however, balancing the focus between sales force...