My Involvement
All enterprise development steps should be in accordance with or directly result from
senior leadership decisions. As they typically involve major change, most often with
legal implications, their implementation normally needs formal senior management or
board approval and sign-off. Within those constraints, however, there is substantial
delegation potential, either to the internal management structure or to a supporting
practice like mine. Scope stretches from very limited to virtually all encompassing.
Examples of activities the client may want to (partially) offload:
Search
The identification of suitable target companies to be addressed. Initial contacts may be
included in this stage.
Selection
The short listing and selection of candidates, with which discussions and/or
negotiations seem promising, and that are prepared to pursue the matter.
Negotiation
The process of achieving a common position on the content, scope, terms and
conditions of the agreement with one or more identified candidates, typically including
pricing, and mostly subject to discoveries made during "due diligence".
Stakeholder buy-in
Ownership of major steps in enterprise development can be with senior leadership or
with other stakeholders (e.g. shareholders, chairman, board of directors, or even
supervisory board, employee representation, trade unions). Optimally there is a
common understanding shared by all of them. But conflicts of interest may crop up as
well, even within one category. Not only do they need to be resolved before proceeding,
their visibility can also strongly demotivate the discussion partner. If only to avoid the
suspicion of undue pressure, my client, who could be representing any (subset) of these
drivers, may choose to delegate all or part of this essential (background) process.
Due diligence
Deals involving a change in or acquisition of ownership (be it partial or complete) are
usually conditional on the satisfactory conclusion of a due diligence process, in which
the candidate's operation is subject to a detailed scrutiny. Always a wise precaution,
due diligence usually is a compulsory corporate governance item for publicly listed
companies.
It covers topics such as a financial and performance assessment, solvability and cash
flow analysis, order and delivery pipeline, work in progress (including balance sheet
valuation), ongoing litigation if any, legal exposure, composition and quality of the
workforce, portfolio quality and fit, competitive positioning, valuation and pricing,
customer and ongoing contract base, organisational structure, and the assurance of
continuity, e.g. through earn-outs.
Apart from considerable "on board" expertise, a major task at this stage is the
orchestration and coordination of a number of content experts, each chartered to
provide a component of the effort.
Contract
If, after due diligence, a formal agreement to proceed is reached, this needs to be laid
down in a binding contract, holding the detail of all mutual obligations and
responsibilities and the roadmap for implementation. Contract quality is a cornerstone
in any deal. An essential component of the contract is the definition of the metrics and
measurements of success, which may very well be direct input to the staging and height
of payments to be made.
Implementation
Any deal is as good as its implementation. This stage tends to be the most disruptive
and even traumatic for all affected people and entities. Furthermore, it is the time to
test the assumptions underlying the agreement, to possibly adapt and optimise in
accordance with actual findings, to measure progress and success, to declare closure
when appropriate, and to derive any lessons for the future. In short "the proof of the
pudding is in the eating".
Mediation and arbitration
Inter company deals, even if documented in detail, have to be based on mutual trust.
Sometimes situations arise that are not explicitly foreseen in the contract, or where
"good commercial practice" or "fairness" deviate from the formal legal framework. Of
course, litigation is a feasible resolution path in such cases. But reverting to that option
tends to be lengthy, destroy mutual trust and put an end to common purpose, thus
obviating the very essence of the transaction. Parties may therefore prefer voluntary
mediation or arbitration. Independent of my level of involvement in the venture thus far,
they may elect (either by contract or ad hoc) to entrust this responsibility to my practice.
