Leadership Insights on Change Management & Preparing for Business Exits | With Victoria Bell & Markus Nagel

A robust change management strategy is critical when preparing for business exits, especially for private-equity-backed ventures. Evolution Consulting Partners (ECP), a JSS Search company, recently engaged in a conversation with Victoria Bell and Markus Nagel, experienced finance leaders in PE-backed transformations, to gain insights into the complex processes of business transformations and exit readiness.

Their discussion highlighted the key pillars necessary for successful transformations, from having a clear vision and aligning teams, to managing effective communication, and planning ahead for potential exit scenarios.

The Fundamental Features of a Successful Transformation

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Q: From your perspective, what is a critical aspect needed to deliver a successful transformation from a finance and company perspective?

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Victoria: Vision, People, Budget, and Prioritisation

Transformation skills are needed for almost every private equity investment. When a business is acquired, there’s always a change process involved. Whether that’s across the whole company or a specific function, you can expect substantial transformation.

So, I think the most important thing is having a clear vision for the business - where do you want to end up? If you don’t have that, it can be difficult to anchor the transformation. From that vision, you can then work out where the biggest impact needs to be.

To do this, you’ll need to get three things right: the people, budget, and prioritisation. You need the right team, with the right capabilities, and the capacity to carry out the change, not to mention the resources to implement it. You also need to be clear about what is happening now, and what can wait. Not everything can be done at once, and people need to know when their projects will come up.

Markus: The Role of Effective Communication

One point I’d like to add, which is implicit in all you said, is communication. I feel that rumours often spread faster than facts in times of change. So, it’s important to have a continuous storyline and make sure everyone is speaking the same language, down to the buzzwords. It is important to bring people together to talk about the change and understand it before you start the journey.

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Change Management Strategies

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Q: Leading on from communication, what other change management strategies would you put in place to achieve a successful transformation and how do you implement this?

Markus: The Need for Clear Roles

One concept that has stuck with me comes from a book, which is the idea of the bus. Imagine your key management team is sitting on a bus, and each person is on their own seat. Before you start your journey, you need to check (a) if every seat is taken and (b) are people in the right seats. As sometimes the roles people had before private investment might not be the best fit anymore, now priorities have shifted.

?This is where the idea of red and green seats comes in. A red seat doesn’t mean the person has to get off at the next stop – it just means they might need to be repositioned. Then, every leader in the main bus should have a minibus per team and do the same thing. This way, you have a clear structure from top to bottom, all aligned with the same goals. It makes execution much smoother and, as mentioned, helps with communication.

Exit Readiness

Q: Continuing the bus analogy, how can business ensure they not only have the right people on the bus, but also know which route the bus is taking, allowing them to plan ahead for who gets on and off along the journey?

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Markus: Assessing Exit Readiness

When we talk about the journey from entry to exit, one topic that comes up is exit readiness. It’s important to question when the right time for an exit might be. This could be in three to five years, based on your investment thesis and growth plans.

But sometimes, it might take longer if you’re facing challenges like a struggling competitor, a global financial crisis, or even a pandemic. There are so many factors that either speed up or delay your exit story. What’s crucial, though, is finding a way to determine whether your company is ready to start the exit process.

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Victoria:

Yes, and we’ve done this previously with a business and found it a really helpful exercise. So, whether the exit ends up happening faster or slower, it’s a really good experience to go through.

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Markus:

It not only improves the quality of the processes but also helps the company find opportunities for improvement. So, while you’re preparing yourself for a good exit process, it offers an additional boost to certain areas that improve profitability.

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Victoria: Succession Planning & Team Stability

Another thing that comes up frequently during exit readiness is the importance of people and succession planning. This is especially true in private equity exits, where buyers will ask, “Who’s in the team, and how long will they stick around?”.

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You might have team members question if they want to stay for another round, or you might recognise its good practice to have a solid succession plan in place. Being able to show you have that is really beneficial; it shows you’re not just strong at the top level, but you’ve got strength coming through below. That depth can make a big difference.

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The Advantage of Clear Data

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Markus: The Role of Data in Exit Preparation

An aspect that stood out in one of our exit readiness projects was the importance of data quality and consistency. It’s important to have the right IT tools, a solid data infrastructure, and the ability to explain fluctuations in KPIs. You’ll find investors often compare your KPIs with industry peers, so you need to be ready with clear explanations. It shows you know your business and strengthens your management presentation – as well as the value of the company.

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Victoria: Simplifying KPIs for Focus

KPI data is the spine of any transformation. Your focus should be clear; some businesses can have too many KPIs, undermining their exit readiness. I once worked with a company that had 280 KPIs, which really missed the point. If you can’t fit your key KPIs onto one page for your management team, your off track. Set it up early so everyone stays focused on the right things, then adjust as needed when you prepare to exit.

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How to Measure Progress?

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Markus: Measuring Exit Readiness

Also, exit readiness can be tricky – what is it, and how do you measure progress?

We’ve tackled this in the past by defining a clear set of criteria to evaluate, scoring each from zero to 100%. You don’t always need to be 100% ready; being 80% might be sufficient, but it’s often necessary to start 18-24 months before the exit to give time to address gaps and assign responsibilities. Exit readiness should be managed alongside your usual operations, not as a sole focus.

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Victoria: Tailoring Readiness to the Type of Exit

Yes, even if you’re just six months out, starting this process is still worthwhile. We’ve also found it helpful to evaluate readiness for different exit options, whether a trade sale, sponsor exit, or IPO. Each requires a different focus, so tailoring your strategy is needed.

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Markus:

That’s a great point. I once worked with a UK business where we prepared our financials under UK GAAP; however, one of the potential buyers was a US-listed company. So, as part of our exit readiness plan, we converted our accounts to US GAAP to match their standards. Then, when they came to evaluate us, we were ready, which simplified their assessment. This kind of preparation is only possible with enough planning ahead of time.

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Victoria and Markus's leadership insights offer a valuable roadmap for organisations undergoing transformation and preparing for a business exit. From ensuring a clear vision and assembling the right team to addressing succession planning and data integrity, the importance of strategic foresight becomes clear.?

Preparing for an exit, particularly in the private equity space, requires a multifaceted approach spanning management, communication, and operational readiness. With proper preparation businesses can optimise their exit process while creating long-term value and resilience.

Meet Victoria & Markus