All Things Data

Master Data Management and Merger of Necessity

I recently came across an article by PricewaterhouseCoopers stating that M&A activity in 2009 would be fueled by Merger of Necessity.  According to the article, “Troubled companies will look to align with larger, stronger players in order to survive, creating the perfect storm for mergers of necessity,” stated Robert Filek, a partner in PricewaterhouseCoopers’ Transaction Services group.  Further, Greg Peterson, a partner in PricewaterhouseCoopers’ Transaction Services group, stated, “Historically, it has been during a downturn when strategic buyers and private equity firms have their best buying opportunities, yielding the best return.”

When an organization acquires another organization as part of a “Merger of Necessity” strategy, understanding the overlap and uniqueness of the customer and prospect bases of the merging organizations is pivotal to developing the up-sell, cross-sell, and cost reduction strategies that are the drivers of the merge.

Utilizing the matching processes and number schema from a Master Data Management solution, an acquiring company can achieve the expected return on investment in a timely fashion by: 

Securing Market Share
Integrating the acquired organizations locations and contacts into existing database systems or brand new systems in a quick, organized, and complete fashion to ensure that the acquired customers are properly serviced and marketed to prevent loss of customers after the merger

Decreasing Costs
Properly allocating the appropriate number of resources based on the proper counting of customers and prospects of the two merging organizations

Increasing Sales
Developing a single customer view so that representatives can see information from the combined organizations utilizing information across multiple data silos to help up-sell and cross-sell

Executing Marketing
Understanding the overlap and uniqueness of the customer bases of the merging organization to develop target marketing campaigns based on the opportunities created by the merger

Data Quality
Identifying data quality issues such as duplicate records, building more complete and accurate records, develop master records for reporting, and other data quality issues

Customer Data Integration and M&A

According to the consulting firm Accenture, “as increased competition drives acquirers to pay closer to the full market value for these companies, the relentless pursuit of accelerated value creation is critical....The clock is ticking.  Any delay in capturing the value [of the merger] results in significant losses for the company and an uneasiness among analysts and investors who are waiting for that value to show up in the financials.  Companies must therefore up their entire game and become much better and much faster at exploiting synergies and capturing value."

“Post-merger activities should be prioritized according to the value they create.  For example, if the greatest value in a merger is cross selling to the new base of common customers, then integration needs to enable and ensure the rapid transfer of customer information and the development of integrated account plans.  Lower-value activities can simply be postponed.”

Accenture even recommends bringing the two organizations together before the merger is closed so that the acquirer can gain their return on investment as soon as possible.  In order to do so and be in compliance with government requirements, a third-party is needed to analyze the data.  This is a process that Accenture calls a “clean room”.

Even if it is not possible to bring the organizations together prior to closing for legal reasons or it is just not practical, if one of the main reasons for the acquisition is to increase market share, then one of the very first things that the newly created organization should do is integrate the customer bases of the two organizations.  With this integrated customer view, you can plan and execute on the cross-selling and up-selling opportunities created by the merger.  Using internal data as well as appending external marketing data, you can enhance this integrated customer view even further in order to find the multiple locations for organizations that are related to your customers.  The sooner that you can integrate your customer data and understand the uniqueness and overlap within the customer base, the sooner you can achieve the return on investment that was anticipated when the acquisition was made.