Dear AT&T – So You Bought Time Warner, Now What?
Congratulations on the acquisition – dropping $85 billion and getting past US District Judge Richard Leon and the Justice Department was a tough fight (you should have put it on pay-per-view to offset your legal costs). With your victory you now add an amazing package of content to deliver over your phone networks*, DIRECTV, and various internet channels.
You have expanded your reach into your critical suppliers. Michael Porter is no doubt ready to add you as another example of vertical integration for the next edition of his Competitive Strategy textbook.
But winning your court case is only an early stage of the process. As I discussed with Adam Echter in Xactly’s webinar with Simon-Kucher in March, there is a strong risk of revenue disruption that comes with an acquisition. Your existing sales and marketing teams will be wondering where they will fit under the new firm, and what is going to happen to their responsibilities.
In addition to having a captive set of content that you can leverage (HBO, Turner, Warner Brothers), you also have a captive set of sales teams who in the past were selling to each other (e.g. HBO to DIRECTV). What are their new marching orders?
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How quickly and seamlessly can you put new content bundles in front of your existing subscribers? How much advertising for your own products will you place, and how will you compensate the advertising sales teams? If an AT&T cell phone bundle is advertised Adult Swim – will the commission change for the rep responsible for selling all of the ad slots for this “internal” sale?
If you drop the commission, then the rep will want to sell more to others. If you keep the commission, someone will question how hard it was to close the deal. These fights in the weeds are going to be a new headache for you – but you need to solve it before top reps start to move away.
How about something as simple as the various ways I can watch HBO? Are you going to create a bundle with my AT&T phone that does NOT require me to have DirectTV? Will your AT&T shopping mall sales offices be driven to upsell more HBO? How about pre-loading my phone with the Injustice: Gods Among Us game or DC All Access? But if you do that, who USED to get paid to make that happen?
Warner Brothers now is part of a distribution channel, whereas they used to negotiate deals to get into certain channels. However, do you still want them to get a good deal by having different channels compete for the next Wonder Woman movie, or will you take that commission check away and give first preferences to your own networks? If so, what does that do to the sales team morale, earnings, oversight, and responsibilities?
M&A deals are executed for a variety of reasons – expanding product lines or markets, strategically taking out a competitor, acquiring key talent, deeper vertical integration, etc. When executed successfully, a well-managed deal can have a huge impact on revenue, profitability and overall corporate success. However, many deals languish post buyout, resulting in key talent hemorrhaging while confusion reigns among the sales team. Companies must develop a post-acquisition strategy to execute to ensure that the claimed value can be realized.
To successfully execute this acquisition, you will need to blend (as appropriate) the various sales teams, while not missing a beat in maintaining the revenue stream of your product lines.
- Retain top producers, capture existing internal best practices in sales performance management. Keep what is working, fix what is broken.
- Hit the ground running selling new products as part of an expanded portfolio.
- Eliminate redundant systems
The Big Risks: Turnover of top reps, delayed value creation from the new product lines, uncertainty and chaos in the sales force
So what is the plan?
Disclosure: I have been AT&T customer for my cell phone services for many years, and in the past was involved in consulting to AT&T regarding various incentive plans at certain divisions.
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According to Deloitte’s latest M&A Trends report, mergers, and acquisitions are increasing in 2018. This also means integration, turnover, and strategic challenges for sales forces are sure to follow. To help organizations deal with these challenges, Xactly and Simon-Kucher are hosting a webinar on one of the most effective ways to manage the disruption of […]