2021 M&A activity broke records with over 62,000 deals globally, according to PwC. And Deloitte’s 2022 M&A Trends Survey found 92 percent of executives surveyed anticipate an increase in deal volume or that it will sustain itself over the coming year. Distribution is a hot sector in M&A for many reasons:
- The industry is fragmented, large and diversified.
- The industry is growing, seeing double-digit revenue increases over the past couple of years.
- Continued disruption and uncertainty have broadened the gap between thriving and struggling distributors, with digital capabilities as driving forces.
- Private equity firms continue to have massive amounts of capital they must invest.
- Many strategic buyers — national and regional distributors — are flush with cash and looking to continue gaining scale with acquisitions.
But as any company that has been involved in an acquisition knows, disruption is par for the course.
While each company is busy managing the ins and outs of the deal and making the transition, the sales team is challenged to maintain and grow sales and retain customer relationships. They are charged with protecting revenues and profits, even as their processes are disrupted. Success often depends on how integrated, intuitive and sophisticated their tools are. There is a high-risk customers will be lost and opportunities missed.
In fact, many acquisitions fail to deliver. A report from the National Bureau of Economic Research found that over the course of 20 years, U.S. takeovers led to losses of $226 billion in shareholder value.
Technology can play a major role in mitigating disruption throughout an integration and beyond — and buyers know it. Establishing stability takes time. The more seamless they can make this process, the easier it will be to protect productivity, stabilize and grow — right out of the gate.
READ MORE: Why Data is Driving Distribution Sector Deals Right Now (May 2021)
What Buyers Want
Buyers are putting more emphasis than ever on the available technology stack when evaluating acquisitions. They’re looking for advanced technology, digital capabilities and analytics to gain a clearer view of their potential ROI, such as sales technology that unifies sales, product and customer data and leverages artificial intelligence (AI). Buyers also want technology that can readily scale.
If a seller wants to maximize their valuation — commanding a premium — getting their data and technology in shape could be the ticket.
Buyers are also looking for companies with effective data programs. Analytics gives buyers a clear picture of the existing business and its customers, as well as the revenue potential.
Buyers will pay more for these capabilities because these assets — technology and data — mean a buyer can be more successful and productive from the start.
Of course, these desirables are among other key considerations buyers must account for, such as the size of the company, its locations, the timing of the deal, culture and potential for future growth. They’re looking for companies with effective processes and management, a fitting product or service mix, and strong relationships with their customers.
If Sales Momentum Falters, Outcomes Falter
Sales teams get hit hard in most transitions. In those first several months to a year after an acquisition, sales reps will be working diligently to maintain business, understand new products and services that came from the new addition, and grow with what they have. The tools and training they receive ahead of and during this transition will affect their outcomes.
Sales teams enabled by technology such as analytics, artificial intelligence and automation will quickly get up to speed, optimize their time and generate revenue. They’ll be able to immediately sell smarter. They’ll certainly feel the turbulence of the transition, but they’ll weather it more confidently and get back to smooth flying faster.
Implementing such technology also gets teams on the same page from the start, working from a standard, universal platform buyers can scale across organizations as they grow and acquire additional companies.
Today’s sales platforms pull valuable data out for sales reps and use artificial intelligence to deliver insights, suggestions and talking points. These include cross-selling opportunities, alerts to customer erosion, and various recommendations based on customer behavior, including who to call next.
It’s easy to lose customers and opportunities during the disruption and distraction of an acquisition. Having the right technology in place can protect revenue and make a sales team dangerous from day one.
Kevin McGirl
