High level questions to know before getting mired in details and deadlines
A “Complementary” add-on involves growing a business by entering a related business area while targeting a different market segment. A good example would be Microsoft. Long noted for their Windows OS and Office Suite for non-early adapter tech users, they entered the teenage segment by adding game XBook and the Surface.
Consequently, the most impactful Complementary IT diligences concentrate on growing the business while looking for commonalities to either increase top line revenue or lower operating costs. As with a “Similar” add-on (see Part I), there are a series of questions to guide you in evaluating the likelihood of the acquisition helping you achieve your intended investment goals. A few questions to consider:
- Can the business be rolled into a single, integrated business model?
- Does the lead Portfolio Company have the resources (human and financial) to successfully implement the roll up strategy?
- If not, what commonalities can be identified and rationalized?
- Which systems and processes can be integrated immediately post acquisition?
- What is the long-term integration plan? Does it match your intended exit strategy?
- What is the potential for the creation of selected cross-group internal processes?
- Are there any short and mid-term opportunities for shared services/platforms across the business units?
- Are there any potential carry-over systems from the Platform?
Word to the Wise
We recognize competition for good Portfolio Company deals is at a premium. But, the ultimate responsibility is to shareholders and stakeholders, so taking the time to understand technology in the beginning can prevent many post-acquisition issues. Our suggestion, find a technology solutions company that can think both high-level operations and day-to-day IT needs. Why not give us a call to schedule some time with one of our IT Specialists? There’s no cost, no obligation. Just another way of PIP saying thank you for your business and support.
Also, if you missed it, here’s Part I of this two-part series, “Seven Questions to Ask Before Making a Similar Add-On”