Case Study 06

Acquisition Integration

Situation

The client manufacturers OEM compatible replacement parts and provides associated field service for mission critical process control equipment. The client is considering the acquisition of a regional field service company which also specializes in maintenance and repair work for the relevant process control equipment.

Outcome

Clarity helped management to justify the deal. This work included both market and financial due diligence, as well as facilitated strategic planning to define the top level integration activities in the event of a successful deal. This approach allowed Clarity to support the Go/No-Go decision while in parallel establishing a range of operational adjustments and marketing initiatives required to extract value from the merger. By modeling an integrated future state of the expanded company before completing the deal, the client was able to test certain assumptions regarding its justifications for the deal. Most notably, the strategy included a flawed assumption that the existing management and channel partnerships of the target company could be effectively pointed at specific new customer types. This problem was exacerbated by customer research which showed limited receptivity to the envisioned value proposition to be used among targeted new customer types. Projected new customer revenues were reduced while the anticipated cannibalizing of existing customer revenues was increased, thus killing the deal.