A Checklist for a Smoother Transition to Integration
By Jim Jeffries
Too often companies under-perform their responsibilities for what the deal requires before passing the baton to the Integration team. Due Diligence is not just about numbers and validating the correctness and completeness of...
M&A capability is built around people, processes and tools. Good people are, of course, the most important thing to have, but a good process and good tools can significantly increase the success rate. A good M&A process helps people focus on the right things and follow best practices. Good M&A tools help run the process with discipline, transparency and good collaboration. Having every deal go through a standard set of considerations reduces deal risks and helps the organization learn from mistakes.
You’ve spent years building your relationship with your scheme sponsor, developing a collaborative and integrated approach to funding and investment – then bang, out of the blue, a third party makes a bid for the sponsor and suddenly all bets are off.
Transaction stakeholders continually are seeking innovative ways to translate deal value into a ‘win-win’ situation for both the buyer and the seller. Among the mechanisms considered in structuring a deal has been the use of an earn-out in establishing deal value.
A new report from Kilberry in partnership with Mergermarket, A View from Both Sides: How PE firms and sellers can form wise partnerships, reveals that successful PE deals occur when a thorough two-way due diligence is practiced by both the PE investor and the target investment company. One key area of potential growth for PE investors is to find companies with stellar management teams – and avoid targets with teams that are incompatible with their goals. At the same time, management teams need to understand whether an investor will make a good fit for their culture and working style.
In estimating and planning for a divestiture, it is necessary to gather key data about the business to be carved out, to understand the scope and complexity of the carve-out, develop a sound Transition Services Agreement (TSA), and provide an estimate of the cost of the carve-out. But it can be difficult to collect data for a possible divestiture while under a Non-Disclosure Agreement (NDA), and trying to minimize the number of people under an NDA.
Today’s post will provide a quick analysis of specific integration best practices statistically proven to drive a substantial increase in achieving the optimal pace of M&A integration, gleaned from our State of M&A Integration Effectiveness™ Survey.
“Integration begins with due diligence.” This key principle for success has been thoroughly vetted and proved time and again. But just what kind of early integration assessment and planning can and should be done during the actual due diligence process itself?