3. Create a “clean room” for diligence
During the pre-close transaction phase, availability and access to data — such as supplier contracts, asset quality and customer information — can be stumbling blocks. You could begin to delve into the specifics after deal close, or, in the time between when you sign a deal and when you close on it, you can leverage a “clean room” to accelerate your integration planning activities.
In a clean room, you can rely on a third party or specific individuals without conflicts to share data between the acquiring company and the acquiree. Clean rooms can help provide strategic insights on the impact of key integration areas such as understanding the product and customer overlap, identifying cost synergies in procurement contracts, and exploring cross-selling opportunities.
For example, there may be significant impact on current and future opportunities that are being negotiated and proposed to government agencies. Failure to manage or disclose these impacts can result in significant financial and business risks, including inaccurate pricing, disqualification from considerations and allegations of defective pricing.
Assessing the future state synergies and cost savings — and quantifying the potential exposure to both the buyer and the acquired entity — can inform how anticipated gross synergies assumed in the business case will need to be addressed and presented to the government customers. Additionally, the analysis in aggregate can be leveraged to identify how the operating model of the combined business will need to change relative to the evaluation of contract terms and recoverability of costs.
Companies can analyze data from both parties while maintaining procurement integrity and protecting otherwise sensitive and proprietary information. This allows proactive and responsive management of the public sector portfolio while mitigating the risk of business loss and future liabilities related to alleged noncompliance.
A clean-room analysis can help you develop an accelerated integration plan and identify and deliver on quick wins. It can also support the collection of inputs for developing an integrated future state blueprint of the combined entity.
4. Develop detailed operating models for the complete value chain
It’s crucial to understand each company’s current state on people, processes, systems and assets. This information forms a foundation for understanding and assessing respective capabilities — a blueprint for analyzing how to operate as a combined entity.
Future state operating models depend on the type of the deal; for example, for a small “tuck-in” transaction, where the objective is perhaps to increase production capacity, you may not want to make sweeping changes to your operating model.
However, in the case of a large transformative deal, you may leverage this as an opportunity to reshape the business completely. Hence, identifying the main value drivers is important to developing the future state operating model for the combined business.
Operating model questions can range from the highest level — such as “What should be our go-forward distribution footprint?” — to even more granular decisions, such as “How will the combined companies place purchase orders for parts?” It’s critical to conduct a careful current state assessment of the entire value chain and a thorough future state design by involving both parties and keeping in mind the value drivers that were identified during the deal’s initial stages.