The acquirer should look to their customer due diligence partner to be their strategic advisor during the integration process. This post discusses how and why acquirers should expect more.
Lesson 6: Acquirers should expect more
There are three dimensions acquirers should consider here – first, they should expect their partner to be experienced and forward-thinking; this means that the firm conducting the customer due diligence should be able to identify about 98 percent of what could present challenges in the execution of the program, and of that, they should know how to address about 99 percent of those issues. In other words, there should be few surprises in the planning and execution of the program.
The second dimension relates to how the results should be used – having a partner who not only gathers information, but also provides guidance to customers on how to use (and, in some cases, how not to use it) should be a core expectation. Our stance at Walker is simple – if you are going to go to the effort of asking your customers to provide feedback (and you absolutely should), you should also be prepared to take action on what they tell you, and you should use your customer due diligence partner in navigating the discovery of these key actions.
The final dimension relates to what acquirers should expect relative to the end deliverable – as Phil Bounsall's blog noted, we have seen that a common deliverable is a simple data dump of a lot of open end commentary. This is, to be sure, interesting reading, and given a significant investment of time, the reader will come away with a sense of the risk inherent in the customer base (assuming, of course, that the customers were not cherry-picked for the purposes of the due diligence). However, there are several questions acquirers should ask themselves about this process:
- Is this how I want to invest my time?
- Am I objective enough to reach the right conclusions within this data?
- Wouldn’t it be better to have a sound analysis of situation and have access to the detail if I really want to dive in?
In short, we would advise acquirers to look to their customer due diligence partner to be just that – more of a strategic advisor that will help to assess the level of revenue flight risk as well as identifying what steps should occur to address customer issues and to make any integration steps move as smoothly as possible.
Customer due diligence can be a powerful exercise that can add value not only during the negotiation and purchase of an organization, but also during the subsequent integration (where most acquisitions begin to fall short of expectation). Our experiences with clients suggest that many of the factors that will heighten the probability of harnessing of this power are contained within this list. Hopefully, this series will provide some valuable food for thought as you plan your next acquisition.