Challenges of Go-To-Market Integration

More often than not, M&A involves go-to-market integration. After all, companies are bought to achieve revenue synergies in new markets. In this interview, Massimo Malizia, Director of Corporate Development Integration at Cisco Systems, talks about overcoming the challenges of go-to-market integration.

Challenges of Go-To-Market Integration

4 Aug
with 
Massimo Malizia
Or Listen On:

Challenges of Go-To-Market Integration

Challenges of Go-To-Market Integration

"Having the right go-to-market plan to achieve revenue strategies is critical and almost always, one of the elements of a successful integration." - Massimo Malizia.

The go-to-market is one of the most critical parts of any integration. Knowing the challenges will helps teams create a better GTM plan. In this interview, Massimo Malizia, Director of Corporate Development Integration at Cisco Systems, talks about the challenges of go-to-market integration.

special guests

Massimo Malizia
Director Corporate Development Integration at Cisco Systems

Hosted by

Kison Patel

Episode Transcript

How early should we start thinking about go-to-market during an acquisition? 

Go-to-market is really critical because it's almost unavoidable on large deals. We know that sometimes, companies do tech and talent acquisitions, and many of those might not have a go-to-market play. 

But other than that, it is extremely critical to achieve revenue synergies, which drive most of the acquisition process. We don't buy companies because we want to cut costs and optimize their way. We buy companies because we want to have revenue synergies in to new markets.

And so, having the right go-to-market strategy, the right go-to-market plan is critical to the success of the integration. It should be part of the pre-commit process. Because the reality is that, as soon as you have the high-level synergies, the go-to-market almost always becomes one of the lever for the achievement of the revenue synergy. 

Challenges of go-to-market integration 

When you have synergies that are achieved through full integration, one of the most common challenges Is the migration of the acquire company sales team into the acquirer. Generally, the compensation plans, the way deals and business are compensated might be different. 

Also, a lot of times, you have a bigger company buying a smaller company. Normally the bigger company already has a direct sales agent and the direct account manager. 

So what happens is when you integrate the acquired sales team into your bigger company, they don't really play the direct account manager role that they used to play. They may play a product specialist role or a business development role. And therefore, that's a big change for them.

If you adopt that, you might be changing also the way they're compensated. And you might be changing the way the product that's been sold in the past and so on and so forth. You might change the route-to-market, it's a lot of change. 

And so, I would say one of the critical thing that acquirer should pay attention is the retention of the sales team and addressing all the most critical element of changes when the sales agents are migrated from one company into another. 

Another thing to pay attention is the legacy customers and how much tender and care they require. 

One reason is if you buy a team and you want the engineering side to start working on your NPIs or on different things, you might need to consider how much time they still need to spend on legacy customers until those customers are completely phased out.

Also, customers might have long contracts. You might need to not only to keep selling to them, but could keep supporting them for a long period of time. And until those customers stay on the legacy systems, on the legacy quote-to-cash, then the majority of the integration is somehow is stalled. 

Because if you have the quote-to-cash on the legacy system, then you also need to keep the procurement-to-pay on the legacy system. So the legacy customer base and the successful migration of the customer base normally is the long pole in the tent for the completion of the system integration. 

Might also be painful if the home of these customers in your acquiring company is very different than what those customers are used to. 

  • Maybe you're changing the products. 
  • Maybe you're changing the route-to-market. They were used to buy directly from the target company and now they need to buy from a partner from you. 
  • You might change the account manager
  • You might change some of the terms and conditions of the contracts might not be acceptable by the acquire so they might require an negotiation.

So I would say, the larger the customer, the more complicated the migration is, and again, that can be really critical because it has an implication both for the sales team and for the system integration. So that's an area to pay attention to. 

Compensation Plan

It's more of an art than a science. Because it is not so much about the mathematics of the dollar compensation, but it's also around what role those people will play in the bigger company. It's not just analyzing pay slips and paychecks and trying to give them the same amount of money.

The first thing that you want to understand is 

  • What are those people doing? 
  • What is their strength? 
  • What is their secret sauce? 
  • Why they've been successful in selling their products?

And then try to replicate that on the larger company, as you integrate them. It's not easy because on the other side, you have a pre-defined set of sales compensation plans that you need to try to squeeze them in. 

You might need to have an existing sales team that might already do some of the things that the acquire sales team is doing. So it's really around the strategy of how do we leverage the acquired sales team as we onboard them on the acquiring company? And then start working on the right sales compensation plan the right combination between base salary and incentive and so on so forth. 

Knowing that not only do different companies have different salary and commission, but even the same company within different countries, there might be differences.

But I would say that mistake is not focus primarily on the total compensation, that, of course, is very important, but start focusing really on what the sales team is doing, what they're doing right, and you want to maintain and how to replicate that as you onboard them in the larger company.

You also want to align what are the opportunities of the synergies between the two companies. Maybe you're gonna get a sales compensation plan that is a little different than what you had, but now you have the support of a larger organization that can allow you to shorten your sell cycle. So you sell more just because you sell faster. 

Changing the way they sell

There might be different changes as you integrate the products to your company. 

  • You might sell the product yourself as a standalone
  • Maybe you change from a standalone and sell it with a combination with other things.
  • Maybe the target company’s sales agent is selling directly to the customer and then you start telling them their customer is not big enough and they need to buy through a partner. 
  • Maybe your changing the product. 
  • Or you are not an account manager anymore, you're a sales specialist and you're just gonna support our account manager.
  • And by the way, what you were selling yesterday was giving you a hundred, now I might give you 85 because we need to pay the partner margin.So you need to sell more to make the same amount of money.

Those generates a lot of questions. For instance, we are fine selling directly to this customer, why do I need to give 15% of my revenue to a partner that I never needed in the first place? 

Well, the reason why we do that is because of scalability. When you go into a larger company, the partner ecosystem is so critical to allow the company to scale, to reach segments that will be too expensive to reach directly and other reason. 

Even the strategy make sense, they are still upset. You still need to make sure that you understand that those changes can be tough for the sales agents.

Speed of GTM Integration

It varies deal by deal. You really want to go through that process of going from the revenue synergy that you promised to your chief financial officer to the elements of the plan that would support those synergies. So how do you reach those synergies?

You need to have lower level objectives before you start fully executing, and that requires some time. It’s going to take more time that 90 days. Having said that, there are generally some natural inflection point. That often are used to start progressing on some of the integration activities. 

  • For example, generally when you start thinking about migrating the acquire company sales team into their new compensation plan, you probably have to start leveraging your annual cycle. And that is a natural inflection point because you leverage an existing process. 

You don't need to recreate the wheel on the integration side. So that's normally one possibility in terms of timing that can happen generally within 12 months from close.

  • And then of course, there is all the other integration elements that might take longer, for example, if you want to start selling the acquired company products on your acquirer price list, and that requires a new product introduction and requires some works on integration side.
  • If you want to shut down the legacy RP, that requires moving all the legacy customers on your system. And that takes some time. 
  • The transition of the quote-to-cash from the acquire company into your acquiring company, that's probably the one that might take the longest. 
  • The other things that you can do sooner is if you want to start creating some synergy and some connection between the sales team, you might start compensating your acquirer sales team on feeds or opportunities coming from the target company. 

So you can create some collaboration within the two sales team relatively easily. You might need some manual process to document all the opportunities and pay out of those opportunities. But it doesn't require some long integration work. So that's one way that could be done pretty easily.

Sales Enablement

One is the migration of the acquired company sales team into their new sales compensation plan. So you actually move the team, you onboard the team into their new roles at the acquiring company. And you start paying them out of that new sales compensation. 

Now, until you have a full operational integration, that compensation process might be manual because you're now going to have the sales team in the new sales compensation plan under a the acquirers entity. But the quote-to-cash is still taking place on the other legacy system, still on target. 

So that piece can happen quickly, but then moving that quote-to-cash and all the underlying process into the acquiring company that's the second big piece and it might take a little longer. That will require a few things.

  • The first one is the creation of the offer on the acquired company price list. 
  • The second is the setup of the customers on the acquired company price list. All the legacy customers need to be now set up on the acquired company. And again, that's important because if you don't do that, then you keep generating revenue on the legacy. You still keep those manual processes alive. So that's the most important thing.
  • And then after you're done, you're generally ready to start turning things off on the legacy system. You start turning off feeds, you start telling customers, Hey, sorry, this product can only be bought on the legacy system anymore. You start maybe sending end-of-life, end of support notices and things like that until you shut everything down. And now you have only one system on the acquire company side. 

Go-to-market is very critical because it's so key for the achievement of the revenue synergies. On the other hand is also key for the achievement of the full integration and some of the cost of optimization that come from shutting down the legacy system and having only one set of systems and processes. 

New Product Introduction

The process is more or less the same with buying an existing product. Although of course you have a dedicated integration team that takes care of the process, so you have some additional support, but in terms of the linearity of the process is mostly the same.

One critical element in the case of integration is to understand how do you onboard the acquired intellectual property and offer into your price list. 

  • Do you want to sell them only from 1 ERP? 
  • Do you remove them from the legacy systems? 
  • Then, what's the best way of selling those products in taking into consideration your go-to-market strategy and synergies?
  • Maybe it's just a lift and shift of the legacy into your new system. So you just take as it is, you change maybe the names, but it's the same stuff. 
  • Maybe it's the same price. 
  • Maybe it's the same names in some cases. 
  • How about pricing? the discount structure of the acquired company might be different. You might still end up with the same net price because you might want to keep everything the same for customers, but the reality is the price list might be changing. 

Of course, if you change route-to-market, then the pricing changes completely because you might go from direct to indirect. 

But you might want to change the way it is sold. It may be sold as perpetual license, at the acquired company, you want to sell it as a subscription on the company that you buy. So the offer strategy is really critical.

And of course, it's the predecessor of the NPI process to onboard those products on your acquiring price list. Again, this is with the assumption that you want to migrate everything you want to use your system. 

There have been instances where the strategy was to keep selling on two different places. The company kept the legacy offer to standalone and maybe they use that for a specific vertical, specific sales segments. And they also enable the products on the acquiring company price list, maybe with some differences to address other segments. So it's not completely unusual to have two sets of offer, maybe to pursue different customers in different segments. 

Integrating the Sales Team

When you buy a company, there's always a downturn in terms of attrition, even just one quarter or two quarters after close. People that for whatever reason, they might not like be bought or they might be poached by another company. So generally, the first two quarters are the toughest in terms of attrition and particular of the Salesforce.

Normally when you announce an acquisition, the sales team start getting phone calls from competitors. So, that's definitely an element to pay attention to and make sure that the talent that is needed is retained.

So a good retention plan, understanding some of the dynamics I think are pretty critical. And then of course, you want to provide to the acquired company and specifically to the sales team the end goal. Why are you gonna stay in our company now that we bought you? What is gonna make you excited about the future? That is really important. 

Everyone says, of course, the sales team is always motivated by cash and by money. That's true. But there's also a component of really showing the strategy and showing what is coming and why you bought that company.

Creating a Good Retention Plan

I think the key critical thing is really to start thinking about not only what you need from the existing team, but also what you're gonna need as you grow the team. 

Evident in the last two years, in the year of the great resignation, because the retention plan might work for the employees that you retain, but as you start growing the businesses, you start hiring new people, those people are not covered by retention plan because they didn't come with acquisition. 

But again, In 2022, there's been so much change that you might have seen now a big portion of the team working on the products that you acquire, that maybe were not in the retention pool.

So do not always use the playbook and always just doing things based on the past, but really thinking through what is the evolution of the team? Because you are going to get some employees that are not covered by retention and how do we keep those people?

You could use cash objectives, stock is the common one, and then you start thinking about are they going to leave after the retention plan? So start thinking about those timelines and how that can impact the team. 

How to get people excited about the future? 

Giving the clarity of the strategic message is important. When the two companies are working together and it's very easy and very natural to see the synergies and the combination of not only the product lines but also of the Salesforces. That really becomes a powerful message that gives confidence to the team. 

Again, a lot of times, it's not only about money. Of course, money is an important factor, but it's definitely not the only factor that drives the retention of the sales team in this case. 

Also, how sincere are you welcoming the acquiring company's sales team is also a nice way of creating that connection. Strategy around the tools that they would use and work together is also an important element.

If you start having teams stepping on each other toes or having maybe some selling motion that are conflictual, the two teams start seeing the others as the potential competitors, and that's where the things might go south. So that clarity in terms of the interaction and the synergies within the sales team is pretty key. 

Product-only acquisition

I you just buy intellectual property, then that’s easier. One of the factor operationally is the presence of customers. So for example, you might buy intellectual property and all they have is they sell through partners or maybe they just distribute IP, whatever that is.

But generally, if there is not a go-to-market strategy and you just buy intellectual property is pretty easy from an integration perspective. It’s almost like a new product introduction. 

And sometimes it depends because when you buy intellectual property alone, it's possible that you buy products that you're gonna put on your price list, but many cases you buy intellectual property to build up maybe a functionality on your existing product.

So you buy something that is not gonna be sold as a standalone. You buy something that is gonna make your existing products better. And in that case, it's definitely easier because you don't have a separate NPI. Of course, you have deliverables and milestones for the achievement of those additional functionalities.

And you want to make sure that you make the team successful to achieve those, but in terms of the operational piece, it makes things easier. 

Talent Acquisition

We’ve actually done asset sale that we call acquihire, where it is really around hiring people and that's about it. In some cases it could be people that do something that becomes core critical to your existing business.

Of course, in some cases it's a combination intellectual property and people. But doing an asset sale from my perspective is not even exactly an integration because you don't need to take care of legacy processes for quote-to-cash, everything stays with the legacy entity. 

You really need just to take care of onboarding the people, to make sure that they have what they need to be successful. So in some ways, it's a very simplified integration. You just need to be fast because you are basically hiring 50 people in one day. 

Real-life Example of GTM Integration

The first thing that I would think is what did we promise to our chief financial officer to get the money to buy the company? Maybe we promised increased revenue of 20%. So you start going down from a strategy to execution and start understanding how do we make up that 20%? And there can be different things that you can do. 

  • We might expand with the acquired company
  • We might export the segments. We were not very good with commercial, but now with the sales team and the product that we acquired, we can approach that segment better.
  • Maybe we can approach better as geography. Hey, we were very good in the Americas, but we weren't very good in Europe, the acquired company sales team and products are gonna allow us to approach those geographical areas. 
  • Maybe now with the new products we can come up with package bundle that is gonna be much more attractive for customers.

So each of them will give us a certain percentage of growth. Now you start going down into the sub-level and the targets that will take you the 20%.

In our company, we do this between pre-commit, but definitely before announcing. You want to have the strategy ready for day one because when you announce the deal, you want to explain to people why you're doing the deal.

Telling them you want to increase revenue 20% is great, but you want to be able to explain at a high level, how you want to achieve those synergies and what is gonna be important going forward. 

And then, as you have that kind of strategy tenets at the lower level, you start planning how to achieve them. And what is the right level of integration that drives those synergies? 

Again, we discussed a lot about the full integration and moving everyone on the acquired company, that might be the right thing for, in some cases, but based on the strategy, maybe there is a combination, maybe it's integration on this side, maybe we keep the acquired company alone for a bit.

Depends on what's the strategy that you need to achieve. So that level of integration is probably gonna be the second thing that we'll be thinking about after defining the lower-level strategy objectives. 

Who’s involved in GTM Integration

There are a lot of people that can be involved in that discussion. Of course, the first is the business unit that buys the company is the first group of people that need to be involved.

The integration team working go-to-market is very critical because they, in some way they provide the insight into what is possible, what is not possible, and, what's the best way to achieve the strategy. And eventually at certain point, you start involving the target company.

You don't involve the target company right away generally, because of course, especially if the negotiation is still going on. But once you know that you're gonna buy them when everybody's on board and everything has been defined, then you start engaging the target company. 

In some way, the plan is a little bit one-sided when only the acquiring company starts working on it. And then, as you onboard the target company then it becomes two-sided where you also get the input of the target company. You start working together to achieve that. That might be a need the need of doing some adjustment.

And some conversations needs to be adjusted before closing. You don't want to scare people away. But it's important to have them as soon as you're confident that the deal is gonna go through and you have the right way of position, the conversation, then you want to hand them even to start creating the right level of expectations in the target company in terms of what's gonna happen.

Lessons Learned

I think one big lesson learned is when you look at the plan on a slide or whatever is presented to you, always start translating that into real life and what it means for people. 

A lot of times, especially on the integration side, we might be a little one or two layers separated from the actual work that takes place and the actual impact of the integration strategy on people. 

So we need to try to bridge that gap and try to understand what does the plan mean for the acquired company employees? What is gonna happen in their lives as the plan is executed?

And once you start doing that, you start asking yourself a lot of questions and you start being able to avoid issues. If you just take what's on a slide for granted and without doing that sort of more introspection around the actual meaning for people of what you see on the slide, then you might be less effective.

The other thing is that people like clarity and they always like to have things spelled out very crystal clear. But ambiguity is not always bad. Ambiguity sometimes at the beginning is normal because it means that you start you want to keep your option open. You have high-level objectives maybe you're still not clear on how to achieve them and that's ambiguity.

Of course, if it stays like that for a long time, that is bad. But in many cases, not necessarily negative, it just means you want to keep your option open until you start really understanding exactly what you need to do.

Lastly, integration is really around soft skills. It's really around communication, making sure that the information that you have are clearly spelled out, that you start documenting the assumptions so that when there is that ambiguity that you focus on, again, the soft skills part of the job that is a lot around making sure people understand what's going on and giving the right expectation.

Because if you start bringing playbooks and checklists in that phase, that's when it fails because people are not ready to start discussing all these checklists and playbooks. They're still at the higher level definition of the strategy. They're not down in the weeds yet. 

Show Full Transcript
Collapse Transcript
Related eBook

Get our weekly exclusive M&A tips

We’re always recruiting people as obsessed with M&A as we are. Join a community of forward-thinking practitioners to keep up on the latest M&A trends.
Take a break each week to hear from top practitioners and browse upcoming podcast episodes. You’ll also have access to exclusive content, events, job opportunities, and the occasional surprise.

Subscribe

Join our M&A community
Get weekly updates about our upcoming podcasts, webinars and events!
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.