Unlocking Value: Five Essential Strategies for Private Equity M&A Success

Have you seen a private equity deal go so poorly that the firm sells the company for less than the initial purchase price shortly after closing? The issue may not have been due to a sudden change in external factors but from leadership's failure to integrate their people and culture effectively, hindering the realization of synergies and deal objectives. 

The saying “culture eats strategy for breakfast” holds significant relevance for PE firms. It emphasizes that no matter how good the acquisition looks on paper, the ability to bring leaders and employees along through the integration is critical to achieving the value creation plan. Switch partners with our clients to help retain critical talent and get leaders and employees aligned to expeditiously move them towards their goals. 

This article outlines five change management and organization design strategies that are crucial for achieving your value creation plan and positioning the newly acquired company for success.  

Leadership alignment 

Executives within the acquired organization and the private equity firm must clearly understand the vision, strategy, expectations, and value creation plan to ensure unified progress towards shared goals. Having this alignment positions the executives and senior leaders to communicate priorities, KPIs and guiding principles with their functional leaders, providing clarity and agreement around what activities will drive the most value. Having this understanding at the get-go, as well as leader involvement in decision-making, helps gain buy-in and support for the critical initiatives. 

One way to accomplish this is to create a Walkaround deck and accompanying talking points. Organize and prepare senior leaders to deliver the same message to all direct leaders and, where appropriate, beyond. If it’s not on paper, it’s unlikely leadership will be aligned or stay aligned. Provide the visual, the talking points, the purpose, the guidelines for execution, and get high-level recurring meetings scheduled so that the initial feelings of ambiguity move quickly to clarity. 

Supporting a High-Performance Culture 

Typically, a full cultural integration may not be necessary, especially if the acquired company will be resold or spun off in 3-5 years. However, as it relates to the value creation plan, working to align values and behaviors to foster collaboration, trust, and a shared vision brings significant value and positively impacts EBITDA. A few examples of how to think about supporting a high-performance culture include: 

• Communication strategy and execution. If employees do not hear from you, they will make up their own story. Or leave. Creating a strategy for communications (both internal and external), particularly between due diligence and announcement, will better prepare those who are impacted, provide clarity, and decrease risk. An effective approach is to tell the story by answering these questions:  

• Why are we doing this?  

• What will the future look like?  

• How will we get there?  

• What is the role of each employee in helping to achieve the intended outcome?  

Understanding and respecting the acquired company's culture and history, then involving employees in the narrative of change, accelerates adoption and boosts productivity. 

Timing is everything, and the communication plan is typically mapped out down to the minute on Announcement Day. Performing an analysis of all the details, how different audiences will react, and the questions they will ask will prepare leaders and provide them with confidence so they will follow through with the communication activities they are responsible for executing.   

• Understand your stakeholders by creating a change champion network, post Day 1, that is representative of your various audiences. Utilize this network to implement engagement and communication strategies that align with your work environment and culture, ensuring efficient message dissemination and feedback collection. Consider a scenario where you have a dispersed or disconnected workforce (such as desk-less employees) or a call center with representatives working in shifts handling customer calls and chats continuously during their shift. Email, midday team meetings, and town halls are ineffective channels for distributing information and can negatively impact productivity. Utilizing existing team meetings, large stickers on shop floors, distributing flyers, or hanging informative posters in break rooms are creative strategies for sharing vital information and facilitating employee questions and feedback.  

  Change champions understand the nuanced environments within their organization or team and can identify effective tactics to engage the workforce and align with the culture and work methods. Moreover, feedback collected through change champions helps in refining strategies, adjusting tactics, and addressing concerns promptly.  

Creating (an appropriate) sense of urgency 

In PE deals, moving fast is crucial, and the success of post-Day 1 activities hinges on stakeholders embracing a new urgency, which may feel unfamiliar or harsh at first. Leveraging the communication strategy discussed earlier and implementing basic engagement activities can foster understanding of the accelerated pace expected from leaders and employees. 

One strategy to encourage a quicker pace is to review the calendar for upcoming critical meetings and invite influential senior leaders ahead of the meeting. Provide them with key talking points and ask for their support to reinforce important messages and provide clarity to the team, helping gain buy-in from meeting participants for a focused sense of urgency. 

Keep in mind, infusing a sense of urgency doesn’t mean driving people to burn out. The value creation plan provides direction for where you should and should not be focused. Your energy and the energy of the team should be applied to the activities that are meaningful and produce results. Leaders must incorporate change management tactics to create a targeted sense of urgency. Switch assists clients by implementing change management strategies to mitigate risks related to value creation initiatives, while also monitoring the well-being of employees as they adjust to the new sense of urgency. We partner with clients to identify potential barriers to change, develop contingency plans, and monitor progress to address issues promptly and proactively.  

Designing more effective team structures 

At Switch, an effective approach we have seen for achieving value involves collaborating with senior leaders on competency and capability exercises to determine optimal team structures and cross-divisional partnerships. Post-acquisition, it is common for the c-suite of the acquired firm to be a newly formed team – new leaders are joining, the executive leadership team is learning how to work together, as well as what is needed from an organization structure standpoint to help make them successful within their area of responsibility.  

Part of designing the organization structure also involves articulating the operating model. Switch works with senior leadership to design operating models for each function that drive alignment and tell the value story in one view. This level of clarity -- structurally, operationally, and across your talent (where each employee understands their role, responsibilities, new ways of working, and strategic priorities) -- positions the entire organization for successful execution. 

Creating a sustainability plan 

At some point, all integration work transitions to business-as-usual, as part of the organization's regular operations. Switch partners with our clients through this transition by creating a roadmap in preparation for the handoff, leaving the team with a sustainability plan that includes immediate next steps, tools, recurring meetings to keep in place, communications, and leader support to sustain momentum and focus. 

Preparing a sustainability plan involves gathering information throughout the integration to better inform the business to maintain and support the progress made. Conducting quarterly reviews is an effective and informative starting point. Keep these reviews simple, actionable, and with the right stakeholders contributing. KPIs, success metrics, or even a straightforward “start, stop, continue” analysis can provide the data you need as you prepare for business-as-usual, while also allowing you to look across the entire organization to evaluate the organization’s health. Having this level of understanding helps ensure that value creation initiatives are implemented effectively, efficiently, and with a focus on sustainability. 

A thoughtful and actionable change management approach can play a significant role in unlocking the value you and your team have calculated on paper. Bringing in a change management expert to lead the right change-related activities in support of the value creation plan will have a minor impact to your P&L but a significant impact on your EBITDA. Incorporating a tailored change management strategy and organization design tactics as a part of your Day 1 planning, as well as your integration plan, will minimize risk, help attract and retain key talent, and increase the likelihood of your overall acquisition success.

For more information about Switch and how we can help you, send us an email at contact@switchconsultinggroup.com. If you’re interested in receiving our latest articles in your inbox or hearing about upcoming webinars, submit your email address in the “Stay in the Know” form below.