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International Acquisition Scenario

Merging Acquired Sales Organizations

When a large telecommunications company acquired a data communications company they were adding new product capabilities for their existing customers.  Their customers were large operators and ISPís who were consuming more data communications equipment as their infrastructures were moving more internet and email traffic.  The small data communications company had developed a sales force which focused on the enterprise market.  It was a highly competitive market which required aggressive sales personnel as compared to the telecommunications market which historically had relied on strong long term relationships with customers.

The difficulties included different sales compensation plans which were heavily leveraged in the enterprise market and minimally leveraged in the telecommunications market.  The data communications sales force, on average, earned considerably more than the newly acquired organization.  In addition, there was a different set of issues and benefits that customers looked at when purchasing data equipment.  The newly acquired sales force had an expertise that was important to the telecommunications company.

The solution was to organize the new sales force in a separate division but assign each of the representatives to groups within the existing sales force.  These teams from both organizations shared common goals and received credit for each others orders.  Since they were both getting credit there was no reason not to work together.  While there was still resentment within the telecommunications company for the amount of total compensation that the new sales people earned, working together on accounts tended to reduce this through an appreciation of the skills that each brought to the table.

The compensation package of the new sales force was restructured over a period of three years.  Each year, the percentage of the leverage was reduced and the total targeted compensation level was reduced slightly to reflect the increased predictability of their income.  Since the individual deals were much larger, the variability of actual sales was much harder to predict and the new sales force agreed with the reduced variability of their compensation plans.  For the telecommunications sales teams, more incentive tied to results was introduced to reflect the increasing competitiveness of the market and the shorter planning and purchasing horizons of their customers, further closing the gap.

By being organized into their own division, the data communications sales team had a support structure that understood their transition and integration issues.  After three years this separate division was dissolved and the sales personnel fully integrated into the original sales organization.  Retention of the newly acquired sales organization was high and the transfer of technology and know how was largely completed during this three year integration process.

Deal Summary


Datacomm Acquisition

Compensation Plan Discrepancies

Organizational Structure Issues

Retention Concerns

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