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Three months post deal

Post-deal value creation

Post-deal value creation

The old cliché of 'never getting a second chance to make a first impression' is still very true today in the business world. This is particularly true for the critical weeks and months following an asset acquisition. Once the deal is done and the keys have been handed over, private equity (PE) funds have a shrinking window of time to capitalize on a fluid situation and set the course for the journey ahead.

Making a first impression

In our experience, few PE funds take full advantage of that window. They may check the boxes in terms of implementing new financial reporting standards, defining board governance procedures or even taking stock of IT processes. Few, however, seize the critical time between bid acceptance and close to develop the core elements of a rapid value creation program.

Still, the first 100 days (if not 300 days) is the ideal time to design and launch value creation programs. Not only is it widely accepted that making rapid change is best done when there has been a step change in ownership, leadership or market event, but newly acquired management teams are often expecting their new owners to take decisive action. They are waiting for the PE fund's Investment Directors, whom they shook hands with during the deal, to walk through their door, review recent activities, and pull the trigger on new cost-saving or value creation programs.

More often than not, a lack of clear communication or focus on value creation strategies can put the brakes on any momentum built up during the deal process. Not only that, management teams that are left to spin their wheels and opine on the fate of their careers can begin to sour, eroding any goodwill that was established before the acquisition. In short, management is expecting rapid action.

Taking action to drive value

That is why, in those critical days post deal, smart PE funds will assign people, resources, and advisors to design operational improvement programs that can be deployed post close and begin generating quick results. The programs can run the gamut from implementing new strategies around 'make versus buy', rationalizing facilities (i.e. footprint optimization), introducing a procurement cost down strategy, flattening organizational spans and layers, or even thinning products and services (specifically, the least profitable products and services).

Our view is that when designing such programs, you want them to be step change initiatives (over and above standard performance improvement) and prioritized on high impact and low complexity areas. Moreover, the most effective programs are those which are backed by effective governance structures and organizational resources, and have the visible support of senior leadership.

No doubt, there is a ticking clock from the moment a deal is signed. PE funds that spend this time taking care of traditional 'housekeeping' activities risk missing a prime window to engage management and sow the seeds of value creation.

And when you are ready,

Let's do this.