Sales Channel Integration After Mergers and Acquisitions: A Methodological Approach For Avoiding Common Pitfalla

Link: https://www.sciencedirect.com/science/article/abs/pii/S0019850106000551

Over the years, several mergers and acquisitions (M&As) have run into trouble due to issues with integration. Daimler–Chrysler’s market value fell by $60 billion after their merger in 1998. Novell’s acquisition of WordPerfect in 1994 resulted in affiliation-related staff clashes, leading to Novell selling the newly acquired business. Data over the years indicate that on average, acquirers have less than a 50% chance of success in M&A.

The poor performance of M&As is attributed to poor channel selection, bad integration decisions, and favoritism (or affiliation bias) across many aspects of post-M&A integration. However, as of the mid-2000s, research had offered little guidance for how to integrate sales channels after M&As are complete.

A paper published in 2007 addressed the integration of sales channels after M&A by appraising the strengths, weaknesses, and biases associated with the four most common frameworks for evaluating sales channels (sales management, historical performance, strategic fit, and customer choice) for their appropriateness in a post-M&A context.

Marketing researchers understand the value of multiple perspectives, or triangulation, for analyzing a research problem. Business executives in turn adopted the “balanced-scorecard” approach as one method to integrate multiple perspectives to promote organizational learning, minimize conflict while building consensus, and generating effective strategic change. This approach was well suited to the M&A context because reducing conflict and promoting learning between two recently merged organizations represent key predictors of successful integrations.

As recently merged organizations form new teams, assimilate their cultures, and resolve their conflicts, the decision environments are often less than ideal. The researches felt that the relative weights of the dimensions and the frameworks should be determined by the newly formed sales and marketing organization on the basis of strategic objectives set by senior management. In this way, the manager’s judgment about the importance of each criterion and the future strategic direction of the organization, as well as evaluations of the reliability of each data source and its importance, drives the relative weights. Rather than merely providing a single final score, this approach generates an overall balanced-scorecard worksheet that presents corrected, standardized scores and weights for each dimension and framework for all channel partners in a single territory.

The study provided strategic insights for sales managers:

1. By correcting for expected biases and using a balanced-scorecard approach, merged companies could avoid potential problems, promote organizational learning, reduce employee conflict, and select more effective sales channel partners.
2. By integrating data from four different sources–sales management, historical performance, strategic fit, and customers– the balanced-scorecard offered a 360-degree view of sales channels and minimized the biases associated with any one perspective.
3. By taking a balanced perspective when making channel decisions, senior managers could avoid the biases and weaknesses associated with any one approach