Computer company expands services through huge acquisition | Deloitte US | Merger & Acquisitions | Case Study has been added to your bookmarks.
Making the leap
Computer company expands services through huge acquisition
Facing a more challenging environment for its hardware-focused business, this computer company did what many of its competitors had already done: It acquired a technology services company to reposition itself for growth. The company wasn't new to acquisitions, having executed many of them on its way to becoming a global leader in the industry. But this one was different. It required the company to extend into a whole new business and as the company's largest acquisition ever, it required the combined organization to reassess how it went to market. Now, the company's hardware and services teams are working together to create new opportunities that were out of reach before.
Any major technology company that's been around awhile probably knows a thing or two about acquisitions. But when an acquisition is your biggest ever, in an entirely new area of business, the old tried-and-true approaches to integration aren't enough.
This deal added a thriving service operation to the company's existing hardware business. To pull it off, they had to connect all the wires to make sure the companies worked together functionally—within 45 days of inking the agreement, no less. And an issue-free day one was table stakes. What really mattered was finding ways to immediately harness the full value of the combined business. To do it, the company needed to reinvent its entire operating model, and then plan its integration accordingly.
Everything was on the table: sales plans, customer strategies and segmentation, global infrastructure requirements, even HR issues such as compensation and benefits. Everything was on the line.
How we helped
When managing an acquisition that fundamentally reshapes the acquiring company, there is no time for missteps. That's why it helps if you've been there before. Deloitte had provided services in support of similar integrations and was able to move quickly while helping the company keep risk in check.
For starters, within a week of being engaged we helped the company redefine its operating model. This important job of determining how the new business would be organized set the context for all the integration efforts that immediately followed. Here are some of the highlights.
Remapping client accounts. Each company employed a different organization for supporting their clients. The hardware side was organized by size of customers, while the services side was organized by industry verticals. Although it might seem like a technical challenge rather than a strategic one, in fact, these divergent approaches presented a serious obstacle to the combined company's ability to go to market in a cohesive manner. We helped them rationalize the two companies' customer lists and redefine the segments to eliminate overlap. Now, the company is able to coordinate clearly and consistently between its service and hardware clients using a matrixed approach that combines size and industry considerations. It is also able to align and plan sales quotas and corresponding compensation for the sales teams.
Go-to-market sales playbook. It's one thing to combine companies with the promise of a strong, unified selling approach. But it's another thing to actually make that vision a reality. Sales force integration, sales compensation, and sales quota plans all had to be revised to enable an overarching sales strategy that effectively combined the service and hardware businesses.
Change management. Like many acquisitions, this one had a “reverse takeover” effect. That is, in many areas the acquired services company actually employed more advanced tools, processes, and methodologies than the acquirer. So instead of requiring the acquired company to adopt its ways, the tables were turned; the hardware company needed to integrate with the services company's approach in order to succeed in new markets. This made communications and change management even more important than usual, requiring a level of effort and focus over and above the standard challenges that accompany any acquisition. Our team helped both companies engage their employees in new ways to ease the path toward a smooth transition.
Integration management. In addition to the strategic challenges, both companies had large global operations with considerable overlap in many countries, which made the tactical task of functional integration extremely challenging. We helped the company manage 17 integration work streams (everything from HR, procurement, and facilities to finance and go-to-market teams) providing them with planning guidelines, tools, and templates from our M&A methodology. The companies used different systems and had deeply entrenched processes and governance, all of which had to be reworked. Our team used a range of tools and methodologies developed through our work in support of other acquisitions to help the company in its efforts to achieve an issue-free day one.
In addition to tackling specific integration challenges, our team provided direct, objective input that helped the client get more value from every step of the integration process.
Although the combined company was fully prepared to operate on day one of the merger, that accomplishment would have been a hollow victory if the companies had not been integrated in a way that positioned them to capitalize on their combined strengths and deliver breakout value. Unlike many acquisitions, this deal was undertaken to meet specific revenue growth objectives.
The company is already on track to meet or exceed its revenue goals, and in the immediate future expects to:
- Increase sales in the broader marketplace through improved collaboration
- Serve clients as a single organization with no drop in service levels
- Drive incremental revenue
- Develop products that reflect the right integration priorities
- Remain on the path to full integration
In many ways, the integration has only just begun. With an effective strategy in place, there is still much to accomplish. Today, we continue to work with the company to help it in its efforts to bring its vision to life.