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The Challenge
Studies show that around 70% of transactions fail to achieve their intended value. This rarely results from flawed strategy, rather from a failure to execute in a timely and controlled fashion. Investors frequently fail to include an assessment of the operational capabilities of the target when evaluating and pricing a deal. This leads to unforeseen capital expenditure and makes the effective integration of business units, processes and systems problematic. In addition, companies which fail to develop well structured integration plans find themselves beset by project delays, synergy losses, and distractions from their business plans that quickly drain value from the transaction.
In China, investments often take the form of strategic minority stakes, or leaving management to operate on a stand-alone basis. Working practices and culture differ significantly from international practice and reliable data is often not available. These issues add further complexity to the challenge of making a deal succeed.
Have you considered how your transaction will be affected by:
- Absence of reliable financial information, management reports and Key Performance Indicators
- Inefficiencies and constraints in the supply chain, human resources, IT and finance functions
- Internal control deficiencies in material business processes
- Unidentified capital expenditure requirements
- Non-compliance with local and international regulatory requirements - e.g. IFRS, Sarbanes-Oxley, FCPA
- Loss of business momentum caused by integration related disruptions
- Unquantified synergy opportunities and delayed synergy capture
Realising the value from your transaction requires the early identification of key deal and integration issues, and close control over execution to achieve improved performance with reduced levels of risk. An effectively structured approach begins with operational, financial and tax due diligence at the deal evaluation stage. It continues through execution with a tightly managed process for rectifying deficiencies, integrating processes and driving longer term performance improvement across the business. Achieving your objectives requires addressing a number of critical success factors:
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Our Approach
Partnering with our Financial and Tax Due Diligence teams, we provide Operational Due Diligence and Integration Planning services to help you plan how to establish control, determine the short-term stabilisation requirements, and identify the improvements that will deliver long-term value to the business. We tailor our approach to the nature of your investment: financial or strategic; and your vision for managing the business: highly integrated or more stand-alone.
While each transaction is subtly different, the key steps remain the same. The depth of analysis at each step may vary but success requires adopting a structured approach to the entire process. The most common activities are summarised below.
Key Benefits
Our team will help you realise the value from your transactions.
Key benefits include:
- Identification of potential deal-breakers and value destroying issues
- Culturally sensitive and resilient long term solutions
- More focus on critical issues
- Faster establishment of control and execution of integration plans
- Accelerated realisation of synergies, efficiencies and cost savings
- More effective use of resources
- Smoother transition period with less disruption to business operations
- Increased ability to measure key metrics and manage operational performance
- Compliance with relevant regulations and reporting requirements
- Improved employee retention
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