Sales Realignment is Critical to Post-Merger Success

There‘s been a flurry of merger and acquisition (M&A) activity in the medical device space within the last several years. Larger companies have continued to grow by acquiring smaller companies, but there also have been several recently announced high-profile strategic mergers of much larger medical device organizations such as Medtronic Inc./Covidien plc, Zimmer Holdings Inc./Biomet Inc., and Becton, Dickinson and Co./CareFusion Corp. Given the changes within healthcare systems around the world, the increased importance of rapid innovation and product introductions, and the need for many companies to gain increased scale, M&A activity is not likely to slow any time soon.

No matter the size of the merger, each acquired company must be properly integrated into the acquiring company in order to achieve the strategic and financial goals of the integration. The post-merger integration (PMI) process often is defined by a series of steps that includes planning, initiation, implementation and consistent monitoring to ensure future success. For acquisitions of smaller companies, the PMI may be quick and relatively seamless, as the smaller company  simply will adopt the acquirer’s processes and systems. For larger acquisitions, or “mergers of equals,” the process will considerably be more complex.

Establish a Go-Forward Sales Team
For most companies, preserving current revenue, market share and customer relationships are top priorities for any PMI—so is accelerating sales growth via cross-selling opportunities presented by the combined product portfolio. Alignment and coordination of the sales team is critical to achieving these objectives and, therefore, a key success factor for all mergers.

The uncertainty that accompanies an acquisition brings competitive risks to the customer base and key members of the sales group. It’s imperative to establish the go-forward sales team as soon as possible to:

• Protect at-risk accounts as well as customers;
• Identify cross-selling opportunities;
• Define new sales territories and responsibilities;
• Establish and align sales management teams; and
• Communicate strategy with customers, physicians, key opinion leaders and the entire sales team.

Align Quickly and Efficiently
Within a PMI there are numerous work streams or functional teams that organize and complete the integration activities. These can take months, depending on the nature and complexity of the integration. For some teams, the risk of delaying the start of integration is manageable. For the sales team, however, every day without a combined structure represents the potential for lost revenue.

Depending on how each organization is structured, it’s likely that there will be some reshuffling of sales responsibilities as well as territories. For example, let’s say that each company divides the U.S. geography into four regions, each led by a regional vice president (RVP), for a total of eight RVPs in the combined organization. Unless four RVPs are eliminated, there will be a need to realign their geographies. Each RVP will have personal financial expectations that should be considered, as well as professional relationships with physicians, customers and distributors that must be respected.

Likewise, distributor territories (and contracts) and/or direct sales district boundaries may need revision to accommodate the additional sales force from the acquired company. Like the RVPs, the sales team will have strong relationships with physicians and hospital accounts that should be respected. All of these variables add complexity to realignment because of the tradeoffs they require.

Particularly in the sales area, the need to expedite the normal process is imperative to maintain market share and seize the opportunity of a combined product portfolio. As soon as reasonably possible, convene a meeting of the sales management team to begin exploring ways to integrate and divide the sales territory for the combined organization.

This meeting should:

• Identify the current territories and key metrics (e.g., revenues) for each RVP, distributor (if applicable) and direct-sales member within each organization;
• Interview each member of the sales management team (RVP and higher) to provide a basis for potential reduction in force (if all of the team will not be retained after the integration);
• Identify critical physician, customer and account relationships that should be maintained or transferred with care;
• Determine which distributors (if applicable) to retain, which to eliminate, and whether there are other competitive distributors to approach; and
• Begin to realign the sales territories based on variables such as geography, sales revenues and critical relationships. This may require detailed carve-outs within larger territories to maintain customer relationships.

Leverage Technology
Many companies have a desire to create sales territories of roughly equivalent revenue. Aligning sales territories is made more difficult by the fact that sales has a significant subjective component, such as strength of relationships between physicians, accounts, and the sales team. Leveraging global information system (GIS) software may help with the realignment process. Sales data can be overlaid with geography (often at the county or local zip code level) and hospital accounts so that, as changes are made to sales territories, the team can see in real time how those changes affect revenue and territory distribution. Any opportunity to inject objective measurements such as GIS into the realignment will make the process more efficient and more precise.

Cross-Train the Sales Team
One of the most immediate and tangible results of post-merger integration success is the ability of the sales organization to leverage the resources of the combined company. This is a time-consuming initiative that should begin as soon as possible. Once you’ve made the decisions noted above and defined the go-forward sales team, it’s important to develop a thorough sales training plan in order to quickly begin training the sales force on the combined product portfolio so they can begin cross-selling products immediately.

Communicate
The sales team is the direct interface with customers and the actual conduit through which information about the company is delivered. Therefore, it’s imperative to keep the sales team up to date on the progress of the integration, particularly any impending challenges with product rationalization or product availability. “No surprises” should be the mantra with regard to communicating to the sales team, because only then will they be able to retain credibility with customers.

Begin Immediately
The objectives and strategy will vary for each PMI, but it’s imperative that the process of realigning the sales territories and management team begins as soon as possible, even before the broader, more formal integration activities commence. This will allow the sales team to protect current business from competitive threats and begin increasing sales and market share through cross-selling the combined portfolio. 

---

Brad Bolen is a medical device consultant in Plante Moran’s management consulting group. Bolen has extensive experience in manufacturing operations and engineering experience in the medical device industry. His industry focus is on medical device sales and marketing, business development, post-merger integration and clinical education. Plante Moran is based in Southfield, Mich.