Remember the customers

We have all heard the mantra of the new owners: “We are the good guys, trust us, we are here to help you.”  However, we have all been disappointed when product lines change, the business is relocated and the prices go up. Even worse, the business is closed so the new owners can take the bits they want and sell the rest.

So it is not unusual for customers to approach the impending sale of a supplier with skepticism. Smart acquirers who value the current customer relationships know this and set out to ensure that current customers are retained.

Very few acquisitions leave current customers with the confidence that life after the sale will improve. Companies buy competitors to close them down and increase their own prices. Buyers strip out assets and sell them off with little consideration for the current customers. Business operations are relocated to low cost countries severing personal relationship between supplier and customer. Good staff leave the vendor when new remuneration systems are implemented and existing team relationships change. Basically, there is often little good news for the current customers.

Of course, there are situations where the acquisition objectives are achieved without needing to accommodate current customers and their loss is factored into the investment model. Some businesses are purchased solely to exploit them in a very different manner to the business model used the vendor. Bad luck for the customers. But this isn’t always the case and valued customers can be lost because inadequate attention was given to retaining them by the vendor or the acquirer.

If current customers are important, retaining them needs to be high on the acquisition objectives and plans needs to be implemented well before the new owners settle in. A process of communication and interaction needs to be undertaken as soon as possible. It starts by ensuring that everyone inside the vendor and acquiring companies understand the importance of retaining current customers so that the informal networks communicate this to customers and the local community. In addition, a very clear formal statement about continued operations needs to be released to customers as soon as possible. Key customers should have a personal visit from the new owner, usually in the company of vendor management. Customers need to understand the business logic for why they are important to the future of the combined business not just the marketing spin.

Customers want to be told that the current products will be retained, if not improved. They want to know that their business relationships will continue without disruption. Customers who have a choice of suppliers need to be convinced they should not be examining alternatives.

The acquirer who neglects current customers risks significant disruption to the revenue of the acquired business. Yet, it does not take a lot of effort to ensure they know what is going on, understand their importance to the future of the business and have their concerns addressed. Value in the acquisition can be easily lost if this activity is neglected.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.