“Driving the acquisition transition phase” is key to achieving the financial objectives of an M&A. This case study takes place in the airline industry. It highlights how the acquisition transition phase can be financially disruptive when M&A support services are not properly lined up.
Challenge
An airline company had completed a well-performed due diligence phase before the purchase of a target company. But twelve months into the acquisition transition phase, the new management team put in place by the Private Equity firm that oversaw the acquisition was struggling operationally. Profits were down and customer satisfaction had suffered.
Several areas were cause of concerns:
- There was no acquisition transition phase plan in place
- The airline was losing ground to competitors
- There was a lack of communication among the leadership actors
- There was a cultural gap between the local offices of the airline and their global HQ
- Procurement, supply chain, and general operational perspective tasks were disjointed and costs were skyrocketing
- Improper accounting procedures had led to over-payments
Opportunity
ROI, cost cutting, and competitivity objectives to be achieved after an acquisition have to be clearly mapped out. Inputs from qualified experts in finance, regulations and, more generally, the acquirer’s industry will help an M&A team get into possession of the business intelligence needed to hit earnings expectations.
The right M&A support services will contribute to driving the project more smoothly through its transition phase. “Driving the acquisition transition phase” is key to generating the ROI projected during the due-diligence phase. The first 3-4 months are critical to this transition.
Solution
At the time RadiusPoint came onboard, the acquisition had been done twelve months earlier. The critical 4-month acquisition transition phase was long past. A logistics specialist was brought in and even though the situation seemed insurmountable, our team identified immediately the main areas to address. We created a path to resolution that included:
- Defining clear values for employee re-training
- Helping to build bridges and better communication between the new management and the staff
- Restructuring the procurement process
- Reviewing vendor invoices and contracts to identify overcharges
Our combined missions evolved into a 9-month project that involved restructuring the airline’s Accounts Payable processes and creating documentation for employee training. Restructuring the staff was also a part of the process, which involved reviewing employee contracts, terminating certain employees, and interviewing and hiring for new positions where a well-defined expertise was needed.
During our invoice processing and review process, we identified over $2M in Value Added Tax (VAT) that had not been recovered. Tracing back all the invoice chain, we were able to claim and recover these $2M.
As part of its M&A support services, in coordination with our logistics specialist of choice, RadiusPoint can deliver:
- Cost benchmarking to bring expenses under control and stop overspending
- Plans to move from high-cost space to lower-cost space
- Logistical restructuring eliminating redundant warehouse space
- New procurement processes effective in cutting costs
Onboarding RadiusPoint’s M&A support services will help your M&A team save significant time, allow your acquisition to move faster, and smooth out the acquisition transition phase.
Contact us to discuss how our M&A Support Services could contribute to your financial expectations for your next acquisition or divestiture project.
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