We have significant expertise in advising businesses on all phases of the M&A process
Having advised businesses in all phases of their life cycle we know that growing your business can be done in two strategic ways: (1.) organically - build more and better products and services internally to scale your business over time and (2.) inorganically - buy capabilities or acquire product and services teams externally to leapfrog the competition, expand into new categories and geographies to dramatically change your business practically overnight.
Businesses are increasingly turning to the second option as they race to capture market share and consolidate fragmented industries. At Cape Sierra we have significant expertise in advising businesses on all phases of the Merger and Acquisition process from the due diligence phase pre-deal, to change management and integration post close and through the holding period, to preparing for an exit or sale.
Pre-Deal Operational Due Diligence
We work with investors and management teams during the diligence phase to determine the need for one-time capital investments in operations and IT, to understand what the operational run rate expenses will be once the business achieves the Target Operating Model (TOM) in the future state, and to outline the steps required to mitigate operational risks. We focus on back office function consolidation, namely IT, HR, Finance and Shared Services as these are central to every business and often present opportunities for synergy in an integration. We then present a plan to accomplish these synergies and implement the changes required post acquisition.
Integration Management Office
Even before the transaction closes there is a host of activities that need to occur. Both sides have to plan to become one company--Communications Plans need to be created, HR has to be ready to welcome a new workforce and address people's fears about "What happens to us now?" IT has to have a plan to onboard and effectively service the new workforce on one set of integrated technologies--laptops, phones, network access, etc. Functions have to think about unifying business processes. Acquired companies may have different or better HR benefits, vacation policies, IT infrastructure, software and ERP systems than what the Acquirer may have. All of these topics need to be thought through and addressed. We help with this and much more. Once the transaction closes the real work of operating as one company begins. It is best practice to have a third party help the functions from each side work together and be an unbiased unifier with good project management, governance, well defined cadence and escalation to an executive group in charge of making the integration a success. This Integration Management Office (IMO) needs to be sensitive, tactful and able to help teams resolve conflict while not losing sight of the business goals. At Cape Sierra we have played this role countless times with great success.
Carve-out Playbook
Many transactions are carve-outs where a segment of the business is being sold but not the whole enterprise. This presents its own unique challenges. Cape Sierra has developed a proven and successful playbook. 1. When the carve-out is to become its own stand-alone entity (NewCo) there is a need to build a greenfield infrastructure for this business from the ground up. New systems, processes and often people across all functions are required. We excel at this because of our strong Technology practice. Cape Sierra is often brought in to put in an ERP system which enables the whole business--Order to Cash, Plan to Make, Field Service, Record to Report, Hire to Retire. The new standalone company needs to make decisions about which systems to use, whether to put them in the cloud or on premise, whether to have a simple bare-bones web presence or build a state of the art e-commerce platform. Often we serve as interim CIO to help get these initiatives off the ground and advise the new management team. 2. When the carve-out is to be integrated into an existing platform business the questions unique to a carve-out addressed above remain but are often directionally answered by the people, processes and systems of the existing platform business. Sometimes we the need to revamp systems and processes altogether. Other times we help integrate the businesses. Our clients know that we execute quickly, thoughtfully, deliver results and provide accountability.
Transition Services Agreement (TSA) Exit Playbook
Many carve-out transactions find themselves in a situation where the Parent of the Carve-out entity is not so neatly organized as to ensure that the Carve-out entity is self-sufficient. This results in the need for the Parent to provide certain services to the Carve-out NewCo post transaction until the NewCo develops such capabilities on its own. These services are codified in a TSA which is time-bound and often expensive to the Acquirer or NewCo. A timely exit of each of these services is necessary and a practical and disciplined partner helps companies to plan for and execute the TSA Exit as expeditiously as possible. Our TSA Exit Playbook was developed based on experience assisting countless clients with Carve-outs.