Add creative value to due diligence projects...

Assessing, auditing, valuing, and making sense of key client relationships is important. We often carry out client listening, focus group, and similar engagement activity that allows us to make recommendations to organisations with a view to informing, retaining and developing relationships with their key clients.

 Recommending a similar model to add value to your clients’ M&A transactions (especially where you are advising the acquirer) will help you to secure and develop that relationship. This may be particularly attractive/desirable/crucial when – following the transaction – you will want to retain and develop business from the new entity or merged organisation.

 In the M&A process, testing the strength, breadth and value of a target organisations’ existing relationships is often neglected in favour of greater focus on valuing tangible assets and analysing the financials and structural integrity of a business. It needn’t be so and it shouldn’t be so.

 Testing a business’s relationships properly can reveal a number of relevant facts and issues including:

·       Relationship strength – what do clients/customers really think of the product/service they are receiving from the target? Who are the competitors? What are the price sensitivities? What are their long-term business plans and do these plans include sticking with current suppliers?

 ·      Breadth of relationship – is the key relationship with one person in each organisation? Or is it wider and therefore more stable?

·       Current value vs. future value – is this organisation going through a change phase that means they have been buying lots of ‘stuff’ and this isn’t set to continue? Does this, therefore, affect the influence of current income from that customer in the analysis process? Conversely are they about to embark on something exciting which requires them to invest in the targets' or your clients products/services to a greater extent?

·      Risks – what business plans and changes are in the pipeline? Does this threaten the relationship with the target or lessen the value?

·      Development opportunities – are there hidden opportunities to do more business? Does this create more value for your client than they originally thought existed (from either a buyer or seller perspective)? Can these considerations balance any negatives to help move the transaction forward?

This can also identify issues that you/your client may need to explore further as part of the wider due diligence element of the transaction. If you need help putting this together, give me a call.

Our team also – importantly - provide an expedited service where issues come to light at a late or crucial stage of a transaction and where lack of information or intelligence can be a deal breaker.

Therefore, adopting this model as part of the process can help to get deals over the line – happy clients!

 Additionally – and often crucially - this can be done without alerting the customer organisation to the fact that M&A activity is underway – it can simply be presented as a piece of client listening where a business is keen to harvest the views of a key client/customer in the normal course of applying best practice and good account management.

 Your client may not be used to this kind of key account management/client listening model, let alone have thought of it as a means of digging deeper into the business of a potential acquisition target. But that doesn’t matter – you can introduce this as a recommended part of your process. It will allow you to present them with something that benefits their transaction and supports management of risk. It may also be something that allows you to present your firm as proactive and innovative to other professionals involved in the transaction – all of whom are future potential referrers.

 Equally – if you are advising the seller in the transaction – there is scope to use this process as part of the exit assessment and preparation.

 Additionally, we apply this model to a number of other audit and due diligence scenarios and transaction types, including:

·       Funding and capital investment;

·      Risk assessment where organisations may be reliant on single or small number of key relationships;

·      Exit and preparation for exit.

 Have a think – how many M&A (or large funding) transactions do you have on the go or in the pipeline? Which of these could benefit from taking this approach?