After a multi-billion-dollar privately held company had an unexpected spend of $100MM following a strategic acquisition, they sought better understanding of what went wrong. Key insights were gained using interviews, process analysis, and cause-effect analysis, which facilitated healthy discussions around acquisition policies and processes. These discussions led to the discovery of serious gaps in communication, information handling, and at least one area of functional knowledge deficiency, all of which resulted in critical failure points.
After the future state of the M&A process was defined, strategies were implemented to close gaps and areas of risk concentration were reduced or mitigated. This resulted in a well-defined and streamlined acquisition capability that has since enabled the organization to acquire targets more accurately and efficiently than at any point in their history.
A company did not have a sound understanding of the risk profile of a target acquisition. EBITDA and other financial data appeared to be sound and in support of expected returns. After conducting a risk assessment as part of due diligence, serious Human Capital risks were discovered that had not been previously considered. Key personnel had either left the target company or were strategically reduced to inflate financial performance. Additionally, morale among the remaining workforce was low. Given these insights, it was determined—through risk adjustment—that the financial impact of rebuilding the organization, retaining existing key stakeholders, and recovering legacy knowledge would not be profitable. As a result, the deal was terminated.