Prioritising post transition change projects

What to do first? – A risk based approach for post-acquisition transition.

Due diligence is complete, negotiation is over and the deal is done. Another successful company acquisition with all of the hard work behind us, right? Well, it isn’t that straightforward.

No matter how good the deal is on paper, the difficult work of either integrating the business into a larger parent, or implementing the changes needed to drive multiple expansion is only just beginning.

The changes wrought by acquisition affect all parts of the newly formed business. There are processes and procedures to be harmonised, consolidation of corporate systems and alignment of different cultures which may require a significant re-prioritisation of long held corporate values and behaviours.

Knowing that implementing these changes has to be done, and without infinite resources or management bandwidth how do executives prioritise what to do first?

The largest potential benefit may come from the change that is hardest to implement, and the easiest change may add limited value. Is it better to take on the big challenges first, or to build momentum with early wins?

As with most things, information is limited, and decisions need to be made in motion without distracting from running the business and driving growth. The importance of getting on with it is amplified by the expectation that comes with new owners looking to see early success on the changes that underpin their investment case.

And as with so many things, timing matters. When aiming for an exit, a potential buyer does not just look at a single moment in time to value the company. They are buying the value of future cashflows, and those cashflows need to be credible based on history and trajectory.

The earlier cost savings or value adding changes can be delivered and cashflows improved, the higher will be the exit valuation.

And then of course, there’s the people. Change can be hard, but it is done best when people feel the change is being done with them, rather than being done to them. How do you create the sense of shared responsibility and achievement to stave off change fatigue and resentment.

There is no perfect answer, though it is possible to tilt the scales in your favour by using a structured approach to prioritisation. We are all familiar with risk registers that categorise the impact and likelihood of events, with mitigating actions that move risks from red to amber, or amber to green.

While the concept is right, without quantification of cost and benefit it is not enough to inform a tangible change program or understand the relative costs of inaction or delay

Real benefit comes from quantifying, in cold dollar terms, the benefit of a particular change being implemented, and the costed risk if it isn’t done.

For example, if one change is to standardise on a single finance platform, how much cost is saved (licencing and support, people, accommodation, cloud costs etc.), how much extra cost is incurred (replacement of unwanted staff losses, extra licencing on the single platform etc) weighed against the cost of delay?

A structured prioritisation methodology using Monte Carlo principles or Pairwise ranking provides a platform for prioritisation based on quantifiable business benefit which links directly to the overall investment case. A logical and explainable risk model is the most effective way to support management buy in, and to frame the scope of individual change programs.

Critically, it also informs the pragmatic, iterative decision-making necessary to know when enough is enough. The law of diminishing returns tells us that it rarely makes sense to chase the last 5% of benefit, when that same effort and cost, could be spent on delivering the first 90% on the next program.

Whatever the methodology, a structured and logical framework that favours outcome over process and uses logic and transparency to support buy-in will be the most effective.

The Euca Difference

Euca is a team of senior practitioners who have direct experience of managing acquisitions and divestments in trade and Private Equity environments.

We focus on planning, leading and executing the necessary changes needed to maintain value, and keep critical resources focused on the core tasks of delivering on growth.

We are a small, specialist team which sets us apart from Big Four style firms with a land and expand business model. We believe that value is maximised when the transition process and cost is finite.

Contact us at info@eucaconsulting.com to discuss how we can add value to your acquisition.


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