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Operationalizing Price as Part of a M&A Strategy

David Anderson< David Anderson September 26, 2018

Mergers and acquisitions have a substantial role in the growth strategy for most businesses. As much as pricing has historically been a focus of driving organic revenue growth, it’s also important to understand the potential benefits of using strategic pricing as a lever for driving cost synergies in acquired businesses.

I was fortunate to spend 10 years of my career working on strategic pricing initiatives inside a business that acquired and integrated hundreds of small and large businesses into their portfolio. This experience taught me a few things:

  • Investments in infrastructure that operationalize pricing process and execution are an important foundation for achieving revenue gains (organic revenue growth with price/volume, eliminating margin leakage, etc.).
  • In acquisitive businesses, it’s important to move aggressively to standardize and synchronize pricing and leverage this platform for cost and selling synergies.

Too often acquirers want to treat acquisitions with “kid gloves,” not wanting to risk change and revenue loss, from the acquired customer portfolio. I am of a different opinion.

Quick Transition

A quick transition to corporate standards need not be a trigger for acquired customer exits. In my experience, as long as customers are treated fairly from a net price perspective, they are often willing to accept a change to the way they buy products or services. Explain that standards, in your broader business, support lower costs that can in turn drive better, lower pricing, and can improve customer experience such as efficient billing, etc. To further aid the transition, customers can also be swayed to accept changes with incentives or with charges for retaining high cost past practices.

Instead of an abundance of caution, aggressively work to retire those old ways of selling, edge-case pricing models, and billing processes. Move your customers quickly to new, broader standards. You will see cost benefits from turning off old systems and eliminating manual efforts and your customers will see benefits in their optimal, efficient interactions with your business. You’ll also be better positioned to manage them in the future with the investments you’ve made in a standardized process for price execution.

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