According to Deloitte, “Corporations and private equity firms pin the most blame on external factors, but recognize the need for more effective due diligence and integration to make sure revenue projections materialize.”
A retailer that was bought and sold twice and was on the market again for purchase. The third buyer performed limited due diligence and initially, the purchase appeared to fit their portfolio requirements. The buyer was not able to spot the risks of underinvestment and lack of proper capability of the current staff. The retail locations were swanky and looked well designed from the outside, however, behind the scenes, there were multiple issues.
- Previous acquisitions had not integrated systems; multiple head offices created confusion as there was no consistency or continuity of business
- Multiple, old Point of Sale systems
- Stock positions were not consolidated and controlled
- Multiple warehouses created confusion and an inability to consolidate
- Poor customer experiences with no system to identify, track or resolve
The key for the buyer is to leave no stone unturned. Assume window dressing is happening. There has to be a keen focus on mapping out the ROI and additional benefits that are to be driven post-acquisition. Bringing in experts for finance, regulatory, and industry experts and generalists can help your team sift through information quickly, and bring about positive results to meet and exceed projected profits. Having the right level of support will drive the project to a smoother finish that will result in meeting revenue and earnings expectations. Proper due diligence is the first step for either the buyer or the seller to ensure that the transition is successful.
Immediately after the acquisition, the Client saw their projected profits disappear and earnings plummet. Dexter was brought in after the purchase and even though the situation seemed insurmountable, the areas of the issue were immediately identified and a path to resolution was created.
- Costs were benchmarked and brought under control to stop the overspending
- A plan was created to move from some of the higher cost space to lower-cost space
- Restructured the logistics and eliminated redundant warehouse space
- Wrote processes to better define procurement to cut costs
Had we worked with the client and brought extensive expertise in advance, the overspending would have been avoided with Dexter’s pre-due-diligence work because the recommendation would have been to pass on this purchase. Dexter provides pre-due diligence efforts to ensure that the purchase meets or exceeds the earning and profitability expectations.
Partnered with RadiusPoint, Dexter hands off the Accounts Payable tasks during the integration phase to ensure business continuity with all of the invoices that your newly purchased company brings to your organization. RadiusPoint can provide:
- Costs benchmarked and brought under control to stop the overspending
- Plans to move from some of the higher cost space to lower-cost space
- Restructuring of the logistics and eliminating redundant warehouse space
- Processes to better define procurement to cut costs
Having Dexter and RadiusPoint on your Mergers and Acquisition team will save your team time, allow your acquisitions to move faster and transition move seamlessly.