Five Best Practices
Keeping the integration team’s focus on risks and drivers of the deal is one of the five best practices for operational due diligence and can save a significant amount of time and money.
Prioritize the value drivers. The temptation to get sidetracked can be strong. For example, if a large restaurant group accustomed to acquiring smaller businesses has historically focused on consolidating back office operations, but the value driver for this deal is the ability to deploy a new technology, then the team should steer their focus to their top priority, which is the value driver.
Start planning early. Begin planning integration and value creation pre-close, as this creates the framework around which the entire deal will be structured. The timeframe for operational due diligence should begin early on, and follow-on work will continue beyond deal closure. A good operational due diligence team will define the integration or value creation strategy early on in the deal, determine how that strategy should be executed, and see that execution through to fruition.
Articulate a vision. Define what the operational model for the combined company will be. Will some aspects of the target’s business be fully integrated or will some continue to stand alone? For example, will the sales and marketing teams be reporting to the same person or will they continue to function separately? Share the vision widely with the key leaders and integration team.
Organize the implementation. Having a plan is, of course, necessary, but adding structure around it will enable the team to execute. Identify milestones, goals, and metrics, and draw up a governance structure to make sure different workstreams are properly executed, coordinated, and headed toward the same end goal.
Day one details. It’s not uncommon for companies to get so absorbed with closing the deal that operations post-close become an afterthought. There are countless considerations, like making sure the buyer has the bank accounts in hand, consolidating reporting within the first 30 days of deal close, and making sure human resources, finance, and accounting policies are aligned. If employee retention is a priority, it behooves you to communicate any aspects of their job that may be affected by the deal, including any managerial or compensation and benefits changes.
Being mindful of a deal’s best practices throughout its life may determine its ultimate success. As the industry is expected to see a healthy amount of M&A activity in 2019, both financial and operational due diligence could ultimately be the differentiators between the restaurants that succeed and the restaurants that fail.