What if I told you there was a little-known strategy to close huge deals with large companies you never thought you’d have a chance with?
Well, good news — there is.
If you know what to look for, acquisitions, mergers, and divestitures can represent that unique opportunity to make the sale of a lifetime.
Why Mergers and Acquisitions Offer a Great Opportunity
The term “merger” makes it seem like the two companies are coming together to pool their resources and work in harmony together. But contrary to what we read and hear there is no such thing as a true merger in corporations, or, at the very least, they are extremely rare.
In reality, one company buys another company, and there is a winner and a loser. When two corporations decide to join together, normally one company buys the stock of the other with cash, stock, or a combination of the two and obtains control over the other corporation.
This is what gives you a great sales opportunity. There is always a period of restructuring after a merger or acquisition where the winning organization will need to update their systems, combine them with the loser’s systems, and acquire entirely new systems.
In divestitures — where one company splits into two, like how Kraft split into Kraft Foods and Mondelez in 2012 — one or both of the newly independent companies will likely need to replace systems that were lost in the split.
All of this gives opportunistic salespeople a big opportunity to take advantage.
The 3 Keys to Taking Advantage of Mergers and Acquisitions
There are three things you need to understand in order to close a sale with an organization going through a merger — capitalized acquisition funds, chaos opportunities, and timing.
Capitalized acquisition funds
The costs of restructuring and integration — as a result of an acquisition, merger, or divestiture — are capitalized as assets and are not expensed the year the acquisition happens.
This allows for the broad treatment of special, non-recurring expenses associated with unifying the two companies. This can include everything from severance packages to the replacement (or upgrading) of existing systems.
These expenses are outside the normal annual budgets and can be paid off over several years. They’re usually classified as an “extraordinary expense” that is displayed on their income statement rather than in expenses.
What does this mean for salespeople?
This means that companies often have a lot of extra money to upgrade existing systems or procedures, improve efficiencies, or add to a data center as a result of an acquisition. The costs can be capitalized so that they do not affect the current budget or profit and loss statement.
Often your contacts aren’t even aware of this, but it is a legitimate way of getting around a non-budgeted expenditure.
Explore this opportunity with your prospect’s project team, especially the executive sponsor. Encourage them to speak with their accounting or finance executives to figure out if this is a possibility for them.
When there is an acquisition of one or more companies, a merger, or a divestiture, there will always be some chaos. There will be new leaders and managers. People will lose jobs, some will be re-assigned, and some will be relocated.
People will need to learn new procedures and systems, there will be rumor-mongering, and there will always be a period of confusion.
In the best circumstances, this is kept to a minimum with effective management. In the worst circumstances, the organization’s productivity will fall to almost zero until all of this is sorted out.
This all means that if you have a solution that can help organize, manage, automate, improve productivity, or generally assist your prospect improve their situation, you have a golden opportunity to make a big sale.
For example, maybe you have a new sales forecasting system that can replace the prospect’s two legacy systems.
On top of the sale itself, this is an opportunity to build relationships with people in new positions that may not be familiar with the solutions in the marketplace –- especially yours.
And if you’re the one to help them through something as difficult as a merger, you can become a long-term, trusted partner. And that can be worth far more than the sale itself.
Timing is likely the most difficult part of selling into a merger or acquisition, and unfortunately, I don’t have a perfect rule for you.
You don’t want to reach out too soon before they sort out who is assigned to the important positions. If you do, your efforts could all be for nothing if your contact gets reassigned or let go.
But you also don’t want to wait too long. The use of their capitalized acquisition funds will expire eventually. You also run the risk of another company beating you to the account.
Every merger, acquisition, and divestiture is different. Some will take months and years to fully transition, others will make the majority of their changes in just a few weeks.
Watch your target organizations carefully, new hires to management positions can be a good sign that the biggest upheaval and layoffs are behind you. However, this is not a hard and fast rule.
How To Find These Companies
Several websites report acquisitions, mergers, and divestitures, including:
If it’s a merger, try to identify which company is winning, and direct your attention there. Use LinkedIn to identify the right people to reach out to.
Do your best to ensure the person you’re contacting is not someone who is likely to be let go or reassigned (This is more likely if they were a part of the losing organization). New-hires are ideal candidates as they are not likely to be moved or let go that soon after hiring.
Other sources for this information include EBSCO Business Source Complete, ABI/INFORM, Mergent Online, and Nexis Uni (formerly LexisNexis), which may be available through your local or university library.
Be the First to Take Advantage
Targeting mergers and acquisitions has certainly led me to finding some amazing prospects and closing some big deals.
And with the right timing, the right product, and a little bit of old-fashioned sales skills, mergers and acquisitions can be amazing opportunities for you to close big deals as well.