Business Structure and M&A Integration
Background and Diagnosis
A privately held European-based manufacturer had recently purchased (from private equity) a combined two businesses focused on products which were both expansive to the buyer’s product portfolio and as well as enhancing to the buyer’s North American presence. The North America CFO had recently exited the company and the European parent had not established a business integration plan for the acquired companies.
Many variables were in play as the combined North America companies were comprised of the two unique manufacturing businesses as well as a distribution arm for the parent’s rest-of-world manufactured products. The two acquired businesses were never fully integrated by private equity, a fact overlooked by the buyer’s due diligence team. The technology platform supporting the ERP backbone was unique for each of the three businesses. Further, the acquired companies had two separate instances of a common, boutique, “burning platform” ERP – again, overlooked by the buyer’s due diligence team. Accounting, Finance, and IT resources were spread across different locations and ill coordinated. Purchasing maturity and HR infrastructure needed to be enhanced to support and improve the North America organization as well as coordinate with the European HQ.
Actions and Solutions
Worked with North America CEO in establishing and prioritizing key areas to address that were missed by parent company’s M&A due diligence team. As well, identify and close gaps in legacy North America processes. This included the stand-up of the North American business organization and structure. Key priorities identified and executed against included: (1) Rebuild of the North America finance and accounting staff who had experienced several personnel exits during the ill-executed post-merger chaos, (2) Drive to a shared services model and leverage best practices across the three divisions in the supporting business areas of Finance and Accounting, Human Resources, IT and Procurement, (3) Leverage and mature the Finance, Planning and Analysis function to have a comprehensive and consistent view across all businesses and better utilize a partially deployed budget and reporting tool across all units for more robust and consistent reporting, (4) Stand-up a North America Human Resources infrastructure to cover all units and harmonize policy as well as align with Europe. (5) Work through and enhance one of the legacy manufacturing unit’s poor procure-to-pay cycle which was overly hands-on and caused manufacturing input delay and substandard cross-department communication, (6) Create a North America comprehensive IT risk profile for parent/HQ to highlight hardware and software soft spots not identified during due diligence; create a roadmap for address of identified priorities, (7) Set-up a new product review process –complete with business case and ROI – to alleviate/illuminate ill-advised R&D spend and increase vetting rigor, visibility and accountability, (8) Worked with parent/HQ on recognition of certain legacy (pre-acquisition) product write-offs, (9) Worked with operations on streamlining inputs to enhance cash-flow, (and 10) Renegotiated with banking partner a lower standby revolving credit facility which reflected the company’s better use of North America working capital.
Successfully launched North America organization, enhanced understanding of key objectives and roles and responsibilities and drafted a roadmap for future direction, inclusive of formal post-merger integration plan. Delivered improved results and path forward to European Board Chairman and European President.