The Effect of Customer Experience on M&A

What do customers think when businesses are taken over?

A recent PricewaterhouseCoopers report called ‘CX in M&A’ was compiled from interviews with nearly 8,000 customers of businesses that have been through an acquisition or merger. Findings were interesting and not altogether negative.

Of the 7,800 customers PwC talked to from around the world, some 46 per cent said that their ‘actual M&A experience’ as customers had been either ‘very positive’ or ‘somewhat positive.’ This compares very favourably to the 20 per cent who answered either ‘very negative’ or ‘somewhat negative’ to the same question.

In the middle, however, was a not insignificant 34 per cent who said that their M&A experience had been ‘neither’ positive nor negative. Any business buyer looking to embark on an acquisition of a B2C business any time soon should be considering ways to win over those 34 per cent and ensure they also have a positive experience of the M&A process and its outcome.

What areas of the customer experience can benefit from M&A?

The report into CX and M&A by PwC found that there were several business areas where customers reported far more benefits as a result of M&A activity than negative effects. These included the company’s reputation, its technological capabilities and the number of products it offered.

Some 58 per cent of customers reported gains in tech capabilities following M&A, for example, while only 8 per cent said this area got worse after a deal. These types of benefits don’t go unnoticed by customers and are easy to promote after a deal is completed. As a new owner, making sure that these areas of your business are pushed to the forefront of what you do can help to ensure that more of your customer base feels that their experience of the acquisition is positive.

Areas that suffer as a result of M&A, in terms of customer experience, include customers perception of the prices the businesses charges for goods and services. Some 23 per cent of customers reported that this was ‘worse’ after a deal, while 21 per cent also reported worse ‘trust and confidence in the business’ after a deal, although 48 per cent still said that this improved as a result of M&A. The takeaway here? It’s always a good idea to bear in mind the areas that can be seen as problematic by a large chunk of consumers.

Why is it a good idea to give customers a positive M&A experience?

Making customer experience a priority during a deal process should be a priority largely because customers think it should be. The report found that some 80 per cent of customers around the world agreed that ‘companies should focus on customer experience during the transition’. However, at the same time, only 30 per cent said they ‘believe companies think about how customers are affected’.

It is perhaps this discrepancy that can prove most damaging to how business’s customers feel about that business. It could explain why 21 per cent feel that their trust and confidence in a business was worse after a takeover.

In addition, only 42 per cent of customers said they thought that M&A was positive for the employees of a company, with many considering job losses to be a negative sign. This is another factor worth bearing in mind when you embark on an acquisition. If you expect to carry out a number of redundancies post-deal, this is going to harm your customer experience, which could reduce the value you generate from the deal.

Perhaps the main message to take home from the report is that putting customer experience towards the very top of your priority list, especially when taking on a potentially tricky acquisition, could help you create value over the short and long-term. One business that seems to be doing just this is Connect Airways, the business that purchased the struggling Flybe airline.

Connect Airways is a newly formed company incorporating several airlines including Virgin Atlantic. It announced earlier this month that it would be rebranding Flybe as Virgin Connect and that customer experience would be improved as a result of the deal.

Connect Airways CEO, Mark Anderson, said that the acquisition would create “more choice for customers through improved connectivity between UK regional airports and Virgin Atlantic’s extensive long-haul network, particularly at London Heathrow and Manchester.”

He added: “From here on in, we invite our customers, partners and the communities we serve to join us on every step of this exciting journey.”

This type of customer experience focus is a calculated and clever way to ensure that former Flybe customers feel part of the newly branded Virgin Connect ‘journey’ and continue to book with the airline despite the enormous changes it has gone through.

In conclusion, buyers need to think about customers every step of the way during a transaction and through the transition period following a deal in order to ensure they retain their core customer base. Considering what the existing customers value in the business and ensuring this survives the process is, perhaps, the most important factor.

Then there is a battle to retain their trust that has been built up over the years. Bringing your customers along on the journey is a good way to think about the process. Although there should certainly be the prospect of new customers following an acquisition, if you lose your existing ones, the hill to deal success becomes a lot steeper.

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