Three ways c-suite execs can enhance digital M&A commercial strategy

Developing this strategy is essential amid the rapid move to digital sales platforms: two-thirds of CEOs say they will increase their capital investments in digital and technology over the next six months, according to the EY CEO Outlook October 2022.

There are three areas traditional companies may consider when developing commercial strategies for digital acquisitions, including:

1. Continuous business models and customer engagement

Digital assets are fundamentally different. Acquirers are often integrating new business models, including those based on subscriptions that provide long-term customer value through services, rather than a product sold in a point-in-time transaction. After the customer makes an initial purchase, a digital M&A commercial strategy can dedicate resources to drive adoption, sales of add-on services and renewals. This makes round-the-clock customer engagement critical, and the acquirer can leverage the target’s capabilities — or ensure their own are mature enough — before fully integrating the digital business.

2. Collecting and analyzing customer data

Digital products with round-the-clock online customer engagement create a bounty of user data that unlocks new ways to engage customers, minimize churn, scale products and expand offerings. This is easier said than done. Because the volume of new information can be overwhelming, it is important for acquirers to be thoughtful in identifying which data is useful and what is not. Beyond broadening the portfolio of offerings, M&A may help in building new capabilities to collect, analyze and ultimately monetize data from all parts of the business.

3. New customers, different needs

Perhaps the biggest revelation for acquirers in digital M&A is, even within the same industry, that the target’s customers may be very different from their own, with new expectations about how they should be engaged. This may include personalized experiences or promotions to draw the customer back. Acquirers may need to refine their own digital engagement skills, such as social listening and digital marketing, and carefully monitor customer satisfaction to avoid churn.

In traditional M&A, the acquisition is often in the same sector or a related sub-industry and the best acquirers are trained to quickly assess and integrate the target. However, with digital M&A, it is key to have the patience — after the transaction closes and before launching an M&A integration strategy — to process the value of what has been purchased, including who the new customers are, how they interact with the product offerings and which aspects of the target need to be preserved. Before they can be truly successful in selling new digital solutions and delivering on the deal’s promise , acquirers need to re-evaluate the combined customer value proposition. They will need to prepare the legacy organization for new selling models, such as software as a service (SaaS); and revamp their entire customer experience and go-to-market models.