Challenges for consolidated firms

There has been an unprecedented amount of M&A activity in the professional services realm. Much of it was brought about by the era of Cheap Money, but even as that has come to an end, firms continue to merge; they’re just not formed by private equity groups. 

The upside of many mergers remains mostly unrealized. Let’s talk about the challenges. 

Mixing sales-led and delivery-led organizations

Generally speaking, a professional services firm is either sales-led or delivery-led. Each has their strengths and weaknesses, but when you combine the two into a single organization, the result is typically less than the sum of its parts. Symptoms include in-fighting and a battle to decide how performance is going to be measured, long before there’s any hope of getting the two groups to grow each other’s accounts. 

Delivery-led organizations often rely on consultative selling to build complex, bespoke sales for each customer. The sales cycles are long, but the relationships are far longer, often for years. Sales-led organizations sometimes prefer a quick-hit, transactional approach that can grow quickly and yields fast revenue. The people involved have different skills and are working toward different results

Incompatible solutions

I swear I don’t know what some of the people in the PE firm were thinking. That’s not true, I’m pretty sure I do know: by the time the results of this deal become apparent, their checks will have cleared and this will be someone else’s problem!

The problem is that two or more technology firms might have nothing at all to do with one another, but they get lumped into the same firm anyway in some hope that “synergy” will happen and they will become the next Boston Computer Group. But that’s not how that works. There’s little overlap in market, skills, or values between a firm that writes custom applications and a firm that trains on process. 

It always falls on leadership

The people put in charge of these firms usually come from one of the acquired bits, and they often have little experience in merging practices together. They tend to promote their own people because that’s who they’re comfortable with, and that leads to justified feelings of favoritism in the other organization. That itself leads to expensive, unnecessary attrition. 

Leaders need to build alliances with real, highly-visible commitments to integrate the practices together at the right pace. Move too quickly and you’ll have a chaotic mess, move too slowly and you’ll have an organization that becomes entrenched and siloed. 

I help my clients navigate these very difficult challenges while growing their revenues. Their organizations become more than the sum of their parts, and integrate into a new, unified whole. 

I’d love to learn more about your organization’s challenges. Contact me for an initial consultation.