Companies frequently combine through merger or acquisition to increase market reach or expand product or service offerings. We find that functions such as human resources, engineering, and manufacturing tend to handle mergers pretty well. For them, it’s a known process. But marketing and sales organizations typically do not combine well. And it is the customer-facing activities that derail otherwise promising unions.

For any merger or acquisition to be effective – to build a stronger company overall – the combination of sales and marketing activities cannot be an afterthought. It must be carefully planned and orchestrated.

Look at what happened some years ago when two computer companies, AT&T and NCR Corp., came together. In effect, their merger destroyed the market position of each. While AT&T was not a leading computer vendor, it did have the reputation of having been the keeper of the UNIX operating system. Similarly, while NCR was not a market leader, it was a well established, proud company. Each company did rank in the top ten equipment vendors at the time, and the merger should have moved them up in the rankings. Instead, the merged organization could not agree on a common approach to the computer market, and they ultimately split. Neither company has any presence in the computer business today.

Compaq Computer Corp.’s takeover of Digital Equipment Corp. had much the same effect. Compaq, a leading player in the PC and PC server markets, gobbled up Digital in part for its services capabilities. Yet over the years following the acquisition, Compaq spent much of its corporate energies assimilating the vastly different Digital culture and neglected the marketing of both its traditional products and the Digital products and services. As a result, the company presented itself as an attractive takeover target for Hewlett-Packard Co., which itself is now struggling to assimilate the three vastly different cultures and product and service offerings.

Sometimes a merger of disparate organizations produces amusing workarounds. At one large software company, consultants brought on through a merger continue to use their old business cards. They find that the outdated cards get them entry into accounts that would not consider hiring their new company for the same work!

What to consider

The combining of two companies is typically pretty confusing to the customer, and if the customer base delays purchases, the merger or acquisition can fail. It’s a snowball effect – companies merge, customers slow their buying, each group blames the other for the problem, the internal finger-pointing begins, customers get wind of the internal battle and go elsewhere, and finally the merger fails to deliver on promises.

In less extreme cases, the marketing and sales organizations battle over control of the message and the activities. Prior to the merger, each company worked to develop its brand position, and turf wars may easily develop. Decisions can be driven too readily by egos rather than the voice of the market – the customer. Too few organizations take the time or have the inclination to thoroughly survey the market to understand and develop a compelling message for the combined company.

Similarly, factions within the sales organization will battle for control unless clear guidelines have been set. In many cases, both companies have called on the same accounts, and sales management must make hard decisions about reallocating territories and accounts after a merger. In our experience, this is not done on a timely basis, which simply confuses the customer base further. Who’s their rep? Who’s in charge? What's going on here?

Tips for Success

Egos have to be managed, and the two teams must continue to focus on the goal of creating a combined firm that is stronger than the two individual companies.

Our advice is to begin the planning of the unified marketing strategy and lay out the first year post-merger marketing plan immediately upon initiation of the merger process (or earlier if possible, during due diligence.) While you cannot bring customers into the loop at this time, it is possible to get a sense as to how they would react to a merger. And a strong marketing communications program that starts as soon as the merger is announced will make a huge difference to how the market responds.

This program must clearly explain the reason behind the transaction and how it will affect customers. Some of the details will be communicated quietly to important customers, while most will be broadcast to the wider market. Then customers must see decisive action. The day that the Chipcom/3Com acquisition was finalized, the Chipcom sign on Route 9 in Westborough was replaced with a 3Com sign. Contrast that with the time it took for the Verizon name to replace “NYNEX” on the company’s trucks, or the fact that you can still receive email from a variety of “dec.com” domains!

Decisive action helps customers to feel confident about the ongoing viability and direction of the new merged entity. And with that confidence, they are much more likely to keep purchasing.

Similarly, the sales organization must have a clear transition plan, with well defined ownership of the function. Many organizations delay identifying the single new leader of sales, instead continuing to appease the two organizations with promises that “nothing’s going to change.” Of course things are going to change! The sooner the new organization can be finalized, the better.

Someone must make hard decisions about sales force coverage – who’s going to own an account post-merger, who will own which territories, etc. These are not easy decisions to make or enforce, but the manner in which they are made and carried out will absolutely reflect the process at the top. Are the two management teams merging nicely, with one clearly in control? Or is it a fight for power and position within the new organization?

If these issues are worked out prior to the merger announcement, the transition can be managed quickly and efficiently. That alone will do a lot for retention of customers and valued employees.

Lee Levitt is Managing Director of The Acelera Group, a sales and marketing services firm serving emerging technology companies and established firms that face significant revenue and profitability challenges. Levitt built and managed the channels consulting practice at research and advisory firm IDC.