“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?
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.
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?
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.
After 20 years in international executive positions, I have now spent 2 years supporting different businesses succeed in their strategy execution. Here briefly some of my learnings and observations.
Trailmaker has been cooperating with private equity for years and noticed that every private equity company occasionally struggles with a slow-progress case. Private equity investors are running their entry process systematically and professionally. Best available information and experts are being used. Despite this, some cases become slow-movers. Before the execution starts, it is hard to tell which one. A risk of delay lies in every case.
“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?