INTEGRATION & CUSTOMER RETENTION CHALLENGES
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Our biggest challenges in M&A are post close – integrating the business (specifically the role of previous owners and key employees – even in the presence of an employment agreement) as well as customer retention – which usually relates to the first challenge. Would love a discussion on how others are addressing these issues? Thanks Ed
VARO, a leading energy company operating in conventional fuels, e-Mobility, and sustainable energy solutions, is addressing the challenges of customer retention and post-close integration through its recent acquisition of elexon. Elexon specializes in electric vehicle (EV) charging infrastructure for business-to-business customers and has a strong presence in Europe, with customers including major logistics companies like those operating both vehicle fleets and airplanes.
This acquisition enables VARO to offer integrated energy solutions that combine its existing portfolio of conventional fuels with elexon’s EV charging capabilities and innovative products like sustainable aviation fuel (SAF). By cross-selling these new products, such as SAF to customers operating airplanes alongside EV infrastructure for their ground fleets, VARO establishes itself as a comprehensive energy partner. This approach helps logistics and transportation customers meet operational and sustainability goals while reinforcing VARO’s strategy to become the most reliable integrated supplier of sustainable energy in Europe.
One of the tools which could help in the integration and retention would be incentives and retention packages provided to the previous owners and key employees (subject to tax considerations). Especially in smaller businesses the role of entrepreneur tends to be large and many customer relationships long and tied to the owners’ presence – therefore also the risk profile of the business is different compared to a larger business. Due to this, there is potentially a place for risk sharing for instance in the form of an earn-out. A key role for the previous owner is to assist in smooth transition post-close – in best case to contribute to business growth while transitioning and to share benefits with the new owner. An alternative could also be retaining a minority stake. Shareholding could also work for key employees provided that they can finance an investment into the company. Normal retention or some synthetic or funded equity arrangement could also be considered.
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