As a continuation of our six-post series discussing some of the challenges associated with combination planning and sharing key considerations for CEO and Private Equity Sponsors looking to grow through Mergers & Acquisitions (“M&A”), our fourth installment focuses on Operations. As we shared in our first post in this series, Vector Advisory Services has created a complimentary M&A Integration Planning Tool to assist business owners and sponsors in evaluating and resource planning for key aspects of business combinations. We previewed this 25-point assessment tool, which includes five critical elements across five common functional pillars, to help leaders focus and assess resource needs to successfully integrate a business. This post discusses the Operational functional pillar, and its associated five key elements:
Product / Service Portfolio: Product and service portfolios or capabilities should be reviewed and assessed for many reasons. As products, services, solutions, and capabilities likely played a role in the pre-close efforts as part of target identification, further analysis by key stakeholders (i.e., product owners) may assist with (1) identification of cross-selling opportunities, (2) identification of potential bundling opportunities, and (3) identification of expanded offerings for existing clients. Tip – Proactive product / service portfolio review and rationalization may also identify unexpected results (e.g., areas in which the legacy company may have been underperforming in comparison to the acquired company). By including key stakeholders from both companies and leveraging relevant data (market, competitor, growth, pricing, profitability, labor costs, margin, etc.), the product / services portfolio review may result in identification of opportunities for increased margins.
Delivery Model (Operating Model): Operating Model integration must consider tools and technology, delivery channels, and delivery partners. Review existing standards and determine whether to establish alignment for an enhanced and consistent customer experience. Consider whether to manage delivery channels and delivery partners in a consistent and aligned manner. Determine whether to standardize operating platforms and other technology supporting operations across the combined organization. Lastly, determine whether a consolidated organization structure for Operations makes sense for the combined organization – leadership, span of control, roles and responsibilities. Change is not always easy or well-received; thus, communication, training, and monitoring will be beneficial for successful change management. Tip – Be cautious when integrating Delivery Models (Operating Models) and don’t overlook specific nuances within a combined organization. For example, are there multiple “verticals” within Operations that require more detailed, granular focus when considering Operational integration? Are there significant variances in operations and/or policies across operating locations that require varying integration approaches by office location?
Metrics & Reporting: Reliable metrics and reporting are extremely enlightening to monitor and evaluate whether operations are efficient and effective. Review dashboard reporting across the combined organization, conduct discovery sessions to ensure the same terminology is leveraged in reporting, perform “stress testing” to ensure data components are reliable, and ultimately develop a more robust metric and reporting dashboard for post-close / post-integration monitoring of operations. Determine the “source of truth”. For example, will all sales related metrics and reporting be generated directly from the CRM? Or are there manual / workaround processes that still need to be considered? Tip – Ensure standards are instituted to facilitate a consistent assessment of customer satisfaction. Determine whether surveys can be leveraged to help assess customer satisfaction pre- and post-close.
Facility Management, Rationalization, & Strategy: The facility footprint should be rationalized to determine where consolidation may be appropriate. Can facilities be combined? Are facilities still needed if a majority of the employees are now in a remote work environment? Tip – Operations and Finance / Accounting should partner closely during the rationalization of facility management and strategy. Cost synergies may be recognized and may be tied to pre-close synergy targets.
Supply Chain Re-Organization: Review key supply chain components, including manufacturing where necessary, to determine what can and should be standardized. Standardization may improve overall cost effectiveness and efficiency to support the delivery of products and services. Tip – Depending on the industry and business profile, a review of key supply chain components may lead to further analysis and review of the overall vendor management program. Consider all vendors and/or suppliers to identify opportunities to improve the overall delivery model.
Defining the vison of the integrated state for each functional area is critical and it should be outcomes oriented. The following is a set of example outcomes that your team may consider, revise, expand, and tailor as it relates to the Operational pillar.
We would love to hear your thoughts about any additional Operational critical integration activities. Stay tuned for additional posts regarding the remaining functional pillars included in Vector Advisory’s M&A Integration Planning Tool. You can also schedule time with us and/or download and use the tool for yourself on our website here.
Contact us with any questions and for more information about Vector Advisory’s services.