M&A or Stress Test Your Existing Business – How to Bring Businesses Together to Create Value

A lot of M&A activity tends to focus on legal and financial aspects but equally important are the operational and commercial elements, as they often show where the businesses can add value / improve efficiency and effectiveness by coming together (integrating) as little or as much as you believe will create value.

We have conducted many of these due diligence activities over the last few years (both face to face and virtually) and whilst our approach is generally the same, our expertise, findings and outputs are all bespoke to the situation. I thought it would be useful to show our approach and the benefits. This approach can also be used to stress test an existing business to help build a strategic plan for improvements or identify opportunities for revenue growth.

What approach do we take?

• We start with a kick-off meeting to understand more about the companies involved and objectives – this will help us to decide where / what we want to see and who we want to meet. We also agree the approach and messaging to stakeholders to maintain confidence (if required)
• We request information (which we walk through also) – this will be adapted dependent on the organisation we are looking at – e.g. is it multi-site, how do they serve customers, how many years have they been operating etc. The request can be extensive for businesses with high volumes of customer contact, operational activities or customer interactions
• We begin our stakeholder process (remote or on site) – conducting interviews with agreed colleagues from executives to operational leaders to ascertain insights into the proposition, the processes, people and organisational design, and the priorities – we do this in order to gain insights into how the business currently operates, the future strategy and plans and evaluate alignment or differences between peers, or colleagues within the organisation. Often the stakeholder process also includes interviews with clients, prospects, lapsed clients and partners too.
• We attend sites and sit with colleagues to find out more about the organisation – getting a feel for how an organisation uses its buildings and runs its operations is insightful. We know what to look out for! We also use a question framework with front line colleagues and first line team leaders which supports the stakeholder interview process.

How does the approach add value?

It is important to have an experienced team leading any activity. We use practitioners, (people who have run/led businesses and functions) and bring specialists in where required to use their more specific skills to review and interpret information and suggest improvements. This could involve workforce planning expertise (where there are contact centres to consider) and commercial contracting expertise (to review contracts commercially as opposed to legally). The team have well-honed skills in questioning and interpretation to get to what we need at pace.

Importantly, Custerian bring together what we see, hear and can evidence through data and insights and then align this to objectives / priorities and create actionable outputs. This adds another dimension that supports integration planning that many may not consider.

The other way we add value is by working closely with other partners such as legal and financial. By partners sharing key thoughts and risks / issues identified and agreeing the impact, you can really help to inform any offer made or for stress testing, ensure financial targets are achievable and then measured appropriately.

How quickly can this be done?

We have developed draft reports within a 3 – 4 week period for medium sized companies. This tends to be a requirement of due diligence activity, as often Letters if Intent (LOI) as issued with a 30-day window. For stress testing it is actually also useful to conduct the work at pace and then continue this into action planning whilst the momentum is there to deliver.

What kinds of things are considered in the approach?

We have delivered outputs incorporating views on many things. Here are just a few:

• Commercial risks & opportunities
• Efficiency & effectiveness of operations
• Colleague engagement
• Organisational design
• Transformation capability and opportunities
• Technology risks, issues and opportunities

We would also outline the priorities and roadmaps to improve and create further value and can even offer additional solution design if required to get the process of improvements and value creation moving!

The Top 4 benefits of our involvement summarised:

• You get to understand more of the ‘how’ the business operates as opposed to what the financials say
• You obtain valuable insights from your clients, prospects, and lapsed clients and partners about your proposition, processes, people and priorities
• You gain a wider perspective from colleagues, a feel for the culture of the organisation(s), where challenges may lie, or opportunities exist to create better aligned organisations – that can be used to inform integration or business improvement planning
• You gain roadmaps and prioritisation plans for improvement that you can pick up and start to work on now, with your own teams or with some ‘kick start’ support – especially for stress testing

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