Due Diligence to Acquisition to Rapid Results: First 100 Days
Accelerating measurable value, reducing risk and driving successful integration post M&A
According to surveys, 70-80% of all integration projects fail to deliver the anticipated value. This is mainly due to firms not having a clear and aggressive strategy for integration from day one (or even before). Evidence suggests that the first 100 days are critical to long-term value creation. As a result, a 100-day plan is now a part of the closing stages of almost every M&A and PE transaction and integral to any strategy to increase valuation within a relatively short period of time.
The first few months when a corporation or a PE firm takes over a business are pivotal to setting the pace of change, getting KPIs in place and establishing a strong relationship with the company's management team. In response to this, firms look to take concrete steps in the early part of the investment lifecycle to clearly establish what they need to do to drive value from the deal. With time of the essence, it's becoming more and more common for firms to begin work on a 100-day plan before they even have ink on the deal. Having a 100-day plan doesn't mean you shouldn't expect to start generating measurable value from your new add-on much quicker. It's possible to hit-the-ground-running and accelerate measurable operational impact within the first 30 days of your plan.
What makes a good 100-day plan?
To achieve accelerated results, your plan needs to be comprehensive, clear and ready to implement straight away. The plan has two main purposes: To provide clear direction to the implementation team, and to build consistency and stability between the acquiring firm and the portfolio company's management. A good plan takes into account all of the short-term mundane integration tasks as well as long-term strategic goals that will shape the company's future. It also has the flexibility to allow you to react to previously unidentified opportunities as you gain access to information that wasn't divulged during due-diligence. It's easy to overlook maintaining strategic clarity and focus during due diligence, as a result focus and alignment is often an imperative post acquisition.
Typically, the plan has four parts:
- Review of costs - an aggressive effort to see where money is being spent and how to reallocate expenses for the best return
- Strategy to build an organization that is capable of delivering the defined value (right people, culture, processes)
- Market analysis - understanding the landscape the company operates in, the underlying trends and challenges and customer base
- Road map - consisting of metrics and targets the board can use to evaluate progress
What can you realistically achieve within 100 days?
More than you may think. Initially, it's important to revisit your due diligence in the light of the additional information you will have access to post-acquisition. If you have brought in outside support during due diligence, their knowledge of your organization, the portfolio company and the relationships they will have built with the people on both sides will be invaluable to identifying new opportunities and to accelerate time-to-value creation.
Rapid post M&A value creation
When a leading PE-owned nutraceutical company acquired a contract manufacturer, they hoped to strengthen their position as a strategic partner of choice within a fast-growing sector. The parent company needed to realize synergies within weeks, not months or years.
Using an operational implementation-focused consulting firm, like Maine Pointe, at due diligence and continuing with the same partner post-acquisition means supply risks can be resolved, new value creation opportunities found and previously identified opportunities implemented all within an accelerated period.
As a result, the first 20% EBITDA savings were realized within the first 30 days of the 100-day plan, with a 50% annualized savings improvement within 4 months of acquisition. Not only that, but the company has a road map which, if adhered to, will deliver $3M in unexpected synergies, leading to a 100% EBITDA improvement.