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26.11.2020

Corporate Acquisitions – Business as usual?

“We have completed financial- and legal due diligence processes and found only very minor red flags. Additionally, all our discussions with the management have been held in a very positive atmosphere. The target company operates in the same market as us and is familiar with the common customers.”

Does this sound familiar? Does this mean we have turned every stone and everything is lined up for another successful acquisition and integration?

Multiple unknowns in M&As

Unfortunately, that is not yet guaranteed. We may have ticked the box for main items as per company policy and as required by top management and the board, however, we have not done all we can to better hedge our bets. Naturally, there will be numerous uncontrolled unknowns ahead and those that we cannot assume to be captured in any process, regardless of how long we continue. Equally there are obvious risks we may have been able to mitigate by adding a small piece in our process.

Having a business case does not equal having competencies

For acquisitions or new partnerships in every corporation, a comprehensive business case is prepared by elaborating the market potential, customer fit, technology compatibility and other business critical areas. The business case forms a very good starting point for a new life together.

However, it is rarely truly concrete - and more importantly - truly committed to by all relevant parties to hit the ground running for real. Neither does it test nor evaluate the competences the organization currently has to achieve the set targets. Thus, the one critical element behind success is typically only very informally assessed. Finally, even though new ventures attract a lot of attention by the management and other stakeholders, it is usually very difficult to follow up the real progress and resource situation – are we really on track? Are the synergies materializing as planned and promised?

A natural momentum should be capitalized

Time is money, and this is particularly the case in acquisition situations. A takeover often destabilizes the organization especially in the acquired entity. On one hand, this creates momentum to make the necessary changes to start the journey towards newly defined targets. On the other hand, it also creates an expectation that the new owners have a plan ready and that it will be executed quickly.

Trailmaker is a standard concept to reduce unknown factors, ensure competencies and utilize the natural momentum in M&As. It addresses the issues in time- and cost-efficient manner. The concept is also very light to run without demanding huge additional effort, otherwise taken away from running the business.

Within one month Trailmaker process identifies the bottlenecks and forms a common view  and focus to ensure fast execution. At the same time, organizational capabilities will be evaluated and possible shortcomings in the execution will be discovered.

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