Why Mergers In the Industrial Distribution Sector Should Invite Tech Transformation

M&A activity in industrial distribution is expected to remain consistent for the foreseeable future, with the highest number of transactions happening in companies specializing in fluid power, motion control, electrical products, tools and equipment, and packaging and supplies, according to a recent report in Industrial Distribution. 

Even with significant capital and resources at their disposal to support change, industrial companies in the midst of a merger or acquisition inevitably experience challenges during the transition. Leadership may uncover potential redundancies in software and tools or experience differences in processes or working styles between teams. 

However, it can also be the perfect opportunity to optimize your existing processes and technology, including your customer relationship management (CRM) software, business intelligence (BI) software, and other sales tools and marketing automation platforms.

The Case for Tech Transformation in Industrial Distribution

Despite a less active 2023 compared to the previous year and higher interest rates, which slow economic activity, analysts are expecting a market rebound and are particularly optimistic about value-added distribution opportunities.

Consumer spending is up slightly, and new residential construction is expected to grow, lifting demand for distribution.

Many investors are looking for add-on acquisitions and product offerings that allow them to serve end markets as well as dealers and resellers, expanding their pools of potential customers. The need for additional capital to reach new markets is driving more M&A activity.

However, successful mergers involve more than just combining teams to grow business.

They require consolidating data, improving efficiencies, and evaluating technology while ensuring a smooth transition for employees and customers. A Boston Consulting Group case study found that “technology delivered more than 25% of the merger’s synergies and became a strategic enabler for several of the company’s long-term goals.” 

If planned well, a merger or acquisition can open the door for company-wide tech transformation.

Consider Relevant Industrial, an industrial distributor that provides specialized process equipment in the refining, petrochemical processing, OEM, food processing, upstream oil and gas, and municipal markets. When the company acquired Precision Fitting & Gauge Company, they began to see challenges with PF&G’s CRM. The navigation was difficult, and only the outside sales reps used it while other departments relied on disparate solutions for marketing and customer support activities. 

Moving to White Cup CRM improved their team’s collaboration and increased efficiency with automated workflows, pre-built dashboards and reports, and more. 

Data Consolidation and Efficiency

Even before a merger or acquisition, many distributors have data silos living in disparate platforms, from their ERP and CRM to eCommerce and stand-alone BI tools. These silos can become increasingly complicated as two or more companies come together.

The immediate, post-transaction period can be the optimal time to readdress your data consolidation and efficiencies across both companies. Having a single, trusted source of business intelligence and sales data can be transformational for your newly combined organization. 

It makes it much easier to report on key metrics like revenue growth, sales performance, and supplier performance without extracting data from multiple systems or hiring an analyst to consolidate it all into a comprehensive report. 

Your board and executive team can easily see those metrics at a glance and have a clear picture of where they need to focus their attention for continued growth. 

Alignment of Business Processes and Goals

Merging industrial distribution companies often have several objectives, including improving operational efficiencies and providing more value-added services. This requires the standardization of key processes like inventory management, order fulfillment, sales and marketing SOPs, and customer service across the new entity.

As companies merge, they often discover an overlap in roles and redundancies in technology that can create confusion. 

Pre-M&A, companies come with their own established sales processes. Teams will often have their own ways of managing quotes, outlining opportunity pipelines, and even scheduling commission payouts.

The post-transaction phase of M&A can be the perfect time to adjust these processes and create new norms for the now-combined team. Evaluating the best practices from each of the merged companies can help establish this new set of processes and tools by leveraging their known strengths. This phase also allows teams to work together to discover weaknesses or challenges each has experienced and what tools or processes can be adopted to solve those.

Cost Savings and ROI Optimization

While M&A in the distribution space involves significant investment upfront, it can also open opportunities for cost savings through the elimination of redundant systems and processes.

For instance, many sales and marketing teams in distribution use separate solutions to contact customers and prospects, including email marketing platforms, support ticketing solutions, and internal tools to share updates on deals in progress.  

With a distribution-specific CRM, they can assign tasks to team members to keep a deal moving forward, set up automated emails to remind buyers of an open deal, and even add personalized product recommendations to quotes to increase upsell opportunities. 

This leads to increased productivity and a higher return on your team’s investment in new technology. By streamlining operations and allocating shared resources across new teams, you can reduce overhead and further enhance operational efficiencies.

Your team can also take a more proactive approach to customer outreach.

Customer Experience Enhancement

While M&A in the distribution space involves significant investment upfront, it can also open opportunities for cost savings through the elimination of redundant systems and processes.

Sales and marketing teams within the merger and acquisition may use separate solutions to contact customers and prospects, including CRMs, business intelligence software, email marketing platforms, support ticketing solutions, and internal tools to share updates on deals in progress.

While it can seem like a burden to migrate the data from a subsidiary’s existing CRM or BI solutions into the parent company’s, M&A creates an opportunity for a fresh start. It gives teams from both the parent and acquired companies the chance to align on new sales and marketing processes, and implement the technology to facilitate those processes within the merged entity.

With the adoption of a distribution-specific CRM solution across the company, those teams can assign tasks to team members to keep a deal moving forward, set up automated emails to remind buyers of an open deal, and even add personalized product recommendations to quotes to increase upsell opportunities.

This leads to increased productivity and a higher return on your team’s investment in new technology. By streamlining operations and allocating shared resources across new teams, you can reduce overhead and further enhance operational efficiencies.

Your team can also take a more proactive approach to customer outreach.

Cultural Reset and Adoption of Innovation

A merger or acquisition can act as a launchpad for technology transformation with the right approach. That starts by defining your M&A strategy, determining how you will increase the value of the combined company, how you’ll execute it, and how you’ll bring your people on board with the changes, McKinsey consultant Chris Hagedorn said during a recent Inside the Strategy Room podcast. 

“Ask, ‘What are the opportunities for growth and for margin enhancement?’” he said. “Will your organization be structured and transact as it does today with a renewed operating model? Or is there an opportunity to do something different with how you reach customers and engage with stakeholders and suppliers, so that you enable a truly renewed vision for how the company will operate going forward?”

M&A can cause some volatility and uncertainty with newly combined teams. It’s important to keep your eye on the unique opportunity you have for innovation and growth. There’s no better time to review your technology stack and strongly consider adopting new technology solutions. Understand the impact that these improvements can make not only across your teams but also how those teams will be better prepared to engage with your customers.

As you redefine your company’s strategy, technology, and processes, your leadership team has an opportunity to set a new precedent within your organization — especially if employees have been reluctant to embrace new solutions before.

Futureproof Your Company With White Cup CRM + AI

Distribution M&A events are the ideal time for technological transformation for your organization. Implementing more advanced CRM, BI, and marketing automation tools not only streamlines operations, but also enhances your market responsiveness and customer engagement, giving you a competitive edge in a dynamic marketplace.

White Cup CRM is built specifically for distributors and designed to integrate seamlessly with your ERP, eCommerce platforms and other solutions, giving you clear insights and the power to act on them. 

With new AI-powered features that recommend your team’s next best actions, you can build a strong strategy for growth and make adjustments in real time. 

You will emerge as a stronger, more agile, and more competitive organization in the distribution sector, ready to adapt to trends as they happen. 

If you’re preparing for a merger or acquisition or you’ve just completed one, schedule a time to talk with us about how we can help you achieve your growth goals.