How to Define the Real Value Drivers in an Acquisition

//How to Define the Real Value Drivers in an Acquisition

How to Define the Real Value Drivers in an Acquisition

Why did the acquisition occur? What was the concept for combining the two? What were the key variables that drove value in the financial model?

Identify those value drivers for the acquisition and focus on these, using Pareto’s 80 – 20 Rule.

The real issues are:

  1. how to use value-added applications to generate more revenue
  2. how to translate strategy into implementation
  3. how to deliver results that meet the projections of the financial model that was employed to justify the deal.

Some strategies are a matter of execution, of just getting it done and checking the box. Most others will require more creativity and exploration; e.g. moving into the new business sector. Still, others are an expansion of existing business with known technology moving into new markets.

So, what about integration?

Integration, especially on the functional side, needs process discipline to get a template in place. That discipline is developed by doing it, getting it as right as you can, measuring and learning from the results, modifying and improving the approach, and using what you’ve learned to do it again. It’s a lot like Business Management 101: Plan, Execute, Evaluate, Modify; Repeat.

Interestingly, those who are in the trenches and will actually complete the work of a functional integration very often know where cost savings are, intuitively know what is most important on the list, and can allocate their time and resources accordingly.

Strategic integration looks forward and needs a vision, a plan, and a story! That’s where the communication comes in! Describe what the fully integrated company looks like in the future, and tell the story of what the company is doing there – how it interacts with customers, how it fosters excellence, how it promotes innovation, how it builds value, how staff there works together. Then ask your team to help you get there! You can’t expect people to help you get to where you want to go if you can’t tell them where that is.

In essence, a business plan is just an organized, disciplined fantasy in how we believe we can make reality reflect what we put into a financial model. The financial model has –to reflect reality, not vice versa.

By |2019-12-07T01:05:42+00:00November 12th, 2019|Merger & Acquisition|Comments Off on How to Define the Real Value Drivers in an Acquisition