Yesterday, I had an interesting conversation. A prospective candidate for our consulting group talked about his interest in providing M&A due-diligence services from an operations perspective. This caught my attention as I believe it to be an opportunity worth exploring. I know many who are dissatisfied with due-diligence outcomes. They generally agree that M&A due-diligence needs significant improvement. It seems to be a contributing factor to the poor results of acquisitions, at least for strategic buyers. Of course, there are other reasons why acquisitions fail to meet expectations, including insurmountable cultural differences, flawed strategic assumptions, and poor management.
My personal experience with due-diligence came after the fact. One of my employers was significantly overvalued because critical operational issues were missed. As a result, the buyer paid more than the business was worth, in a highly leveraged transaction. Cash flow was diverted to cover greater debt service, impacting our revenue potential. So yes, I believe that offering due-diligence services may be viable for our consulting group. In fact, one of our consultants is currently engaged in a due-diligence project.
Considering this business opportunity led me to reflect on how decisions are made by our client companies. I have long been fascinated by the decision-making process especially as it relates to our business development efforts. I have been a part of companies that made good decisions and others that didn’t. I have been a part of highly structured, buttoned-up companies and worked for entrepreneurs. And, of course, I have been an entrepreneur with my own business. The companies that made consistently good decisions were highly organized, and process oriented. They pro-actively managed the culture and employed sound operating principles. The worst, not so much. One company, in particular, was often off the mark because their organizational structure and incentives were not aligned with their business strategy. As a result, there was confusion within the organization.
The best employers nurture a culture that includes fact-based decision-making and double-loop learning. Their operations strategy is aligned with the needs of the customer which they validate continually. Group-think is discouraged and challenged. They aren’t necessarily perfect, but they create a system that generates continuous improvement.
Another area of interest within the larger context of management decision-making is related to developing new markets. Selling a new product to a new customer is the most difficult marketing challenge. Many companies have blundered into new markets without a clear understanding of the risk. I have witnessed retail brands make that mistake when trying to penetrate the Atlanta market. I even worked for one. These brands were successful in other regions of the country but were unknown in the Southeast. I must say, I have seen a few Southeastern brands make the same mistake. What is so surprising is that this common mistake continues to be repeated Why?
These questions are relevant to me as I work to qualify new customers and begin new assignments. I want to know what the prospective client is trying to accomplish and their needs to do so. Knowing a bit about their history and the biographies of their executives if helpful. It is important to know how they choose vendors and the process they employ. Since most of our engagements are through referrals, I usually have a resource to help my research.
I believe that my job is to make my client’s job easier. I fulfill that promise by adapting to their management-style, helping offload their work wherever possible. I don’t add value by forcing the client to adapt to my process. When the prospect becomes a client, my success with the current assignment and future engagements is enhanced by developing a more complete understanding of their management style; their values, marketing strategy, and decision-making processes.
Understanding a company’s process to qualify vendors is necessary to close more deals. Understanding the culture of the company and their management style is required to generate repeat business.
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Jim Weber, President
NEW CENTURY DYNAMICS EXECUTIVE SEARCH
JimWeber@NewCenturyDynamics.com
JimWeber@NewCenturyDynamics.com
Current Assignments
1. COO- Northeast-based Casual Dining Restaurant Company – New
2. Operating Partners – Legacy Pizza Chain – New
2. Operating Partners – Legacy Pizza Chain – New
3. Director of Biz Dev, Atlanta-based B2B Professional Services Company: Completed
4. Payroll-Benefits Manager, Atlanta-based Retail Company: Complete
5. Senior Accounting Manager – Atlanta-based Manufacturer. Complete
6. Controller – Atlanta-based Consumer Products – Digital Company – Completed
6. Controller – Atlanta-based Consumer Products – Digital Company – Completed
7. Outplacement Assignment – Atlanta-based Manufacturer: Complete
Author of: Fighting Alligators: Job Search Strategy For The New Normal
