Blindsided: Where Business Acquisitions Go Wrong

It's easy to be blindsided by the future if you're always looking to the past for information. By the time a customer leaves, you've had months of failures...

Photo: 
Sam Mikles, President and CEO of Flash Global; Source: Courtesy Photo
Photo: 
Sam Mikles, President and CEO of Flash Global; Source: Courtesy Photo

Common business wisdom tells us to know our blindsides and adjust accordingly. The problem is obvious: to be “blindsided” means to be hit by something you didn’t see coming. Often, this happens when you make a business decision based on faulty assumptions or incomplete data.

For instance, my company nearly lost a major customer after acquiring a new facility and company. Here’s what we did to get back in the good graces of the customer and what we learned in the process.

 

Unexpected acquisition challenges

A recent acquisition presented us with some unexpected challenges.

The facility itself appeared to fit our business model perfectly. It has 150,000 square feet of workspace configured for test, repair, CTO (configure to order), distribution, advanced staging, and delivery services to customers. Companies gain a competitive advantage by having these facilities located near major customers and cost-effective operations, so the Midwest location was an excellent strategic fit.

However, we failed to understand the existing customer base. That perfect facility primarily serviced one major customer (Customer A), who accounted for 70 percent of the business located there. The customer was number one in terms of revenue and volume at our new facility.

 

Do you know what you don’t know?

Customer A was very important and extremely unhappy. We were not aware of all the nuances that had taken place with the customer relationship, nor did we fully realize how much of the business operated on tribal knowledge.

 

Business Acquisitions Go Wrong - YFS Magazine
Photo: Bruce Mars, Pexels/YFS Magazine

Remember the children’s game Hot Potato? We were left holding a very hot customer. Our team walked into a simmering customer service situation that we didn’t completely understand. We were blindsided.

Customer A had legitimate concerns about the quality of service they were receiving. The company provides critical services to the retail sector and must ensure 100 percent service delivery and customer uptime to maximize profit and customer satisfaction. We didn’t realize how unhappy the customer was, or even why.

Without a good system to manage material and information flow or expertise in using a combination of Customer A’s system and ours (the proverbial swivel seat) to track material and test data, we weren’t providing adequate service to meet Customer A’s expectations. The tribal knowledge we didn’t have would have filled a book – except the handshake agreements and communicated expectations were not written down.

 

Saving botched customer relationships

The customer was extremely frustrated and almost willing to terminate the contract and walk away. Unfortunately, we didn’t recognize the lack of leadership at the newly acquired facility and the impact it was having on the service provided to Company A.

By the time our senior leadership stepped in, some six months after the acquisition, it was almost too late to salvage the relationship.

The pivotal point to correct the problem was recognizing Customer A’s expectations and requirements. We should have managed the account as “new” from the start, even though it was a long-standing customer for the previous owner. The teams collaborated to align expectations and start doing things the “Flash way.” Our team developed and organized a support structure that included proper leadership to create consistent service execution.

With those blindsides gone, we started building a positive relationship with our customer.

 

Repairing customer relationships during an acquisition

Repairing the relationship meant treating Company A as we would any new customer. Here’s what that looks like:

  • Map the customer requirements to our capabilities.

  • Clearly define SOWs (statements of work) that align the two companies.

  • Define expectations and key performance indicators that measure success.

  • Establish communication protocols and tighten the partnership/relationship with the customer.

  • Set expected target dates for completion to achieve consistent execution.

  • Ensure that both sides understand the tasks and resources necessary to complete projects.

  • Manage the customer from a holistic view, realizing everything is connected.

  • Understand the growth projections and strategic direction of the customer and ensure that we proactively respond to customer needs.

The best customer service experience is one where you get what you need effortlessly – sometimes even before you realize that you need it. Just like any service business, our customers depend on our knowledge and expertise to stop problems before they start.

Depending on the industry, the cost to acquire a new customer can be up to 25 times more expensive than keeping an existing customer happy. Yet many companies measure customer satisfaction too rigidly, relying on either retention or churn statistics. But customer churn is a lagging indicator, which means you’re always reacting.

 

Rebounding from business blindsides

It’s easy to be blindsided by the future if you’re always looking to the past for information. By the time a customer leaves, you’ve had months of failures but didn’t realize it. Look forward instead.

Each time a blindside situation occurs and creates a “how did that happen? situation, we learn from it. In this case, the next acquisition made will include a much deeper dive into the current situation and strategic analysis of the top five customers. We’ll work with them to align service and delivery expectations from the very beginning with our “new” customers.

 

This article has been edited.


Sam Mikles is president and CEO of Flash Global, a leading provider of customizable service supply chain solutions. For nearly two decades Sam has designed, built and implemented global service and support solutions for some of the world’s most recognizable OEMs in the high-tech space. Connect with @FlashGlobal on Twitter.

 

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