It is a sad fact that many of the distressed businesses we see that need our turnaround services can trace poor pre- and post-acquisition integration as a root cause of their difficulties. Buying a business is one thing, but making the acquisition work and delivering the expected benefits is where the really hard work starts, and too many acquirers underestimate the magnitude of the task.
Prior to an acquisition the company should do an in-depth operational due diligence review in addition to the customary financial review. We have worked on many due diligence assignments for clients and most of our professionals have significant experience of acquisition work from their days in industry. David Bryan, in particular, spent years in a public company acquisition team, originating deal flow and running due diligence on hundreds of potential acquisitions. With our experience in hands-on management at factory floor or service sector professional level we have a depth of knowledge to flush out potential issues ahead of completion.
Much of our work has been for US clients looking at acquisition in Europe. We have worked in most countries in both West and East Europe, including Russia, Turkey, Greece and Romania. In the early stages we can provide a low-cost, light-touch service to look at the available information and identify areas of particular concern which will need in-depth investigation and could influence price. We have often accompanied visiting senior management from our clients on initial site visits and target company management presentations.
On an assignment for a US company purchasing a €350 million German company with operations in Germany, France, Turkey, China and Russia, we provided BM&T and associate professionals with operational and language knowledge in all these countries, contributing to a quick understanding of financial systems integration issues and an in-depth product cost and margin analysis, from which post-acquisition restructuring decisions, including factory closures, could be made.
As the process progresses, we can manage all aspects of the due diligence process and bring additional expertise to bear from our extensive network, as required. This could be additional resources in other countries from our ERS network or specialist resources for advice on matters such as tax, pensions, employment law etc. The advisers in our network have huge expertise in their field and are able to work seamlessly as part of a larger team. We are firm believers in using best-of-breed expertise rather than a one-size-fits-all approach.
The first 100 days after an acquisition are the time when maximum impact can be made. The acquired company is expecting change and it needs to be executed quickly and decisively. For that to happen it needs to be planned in detail in advance of the acquisition completing and for there to be a team dedicated to making it happen. The skills required are very similar to turnaround activity, with a focus on what will really make a difference and delivering it quickly and effectively.
We can assist clients with all aspects of post-acquisition integration, from the planning to the execution, and provide additional resources to whatever extent the client requires. On an assignment for a major UK FTSE 250 company with 50 manufacturing sites across Europe purchasing a 40-site competitor, we visited all 90 sites to assess synergistic opportunities and management capabilities. With the client acquisition team, plans for integration were drawn up and quickly implemented post acquisition. Our personnel took lead roles in factory and office closures in Scandinavia, Germany and France and the relocation of production between sites. The purchaser reported a £50 million annualised EBITDA gain from the process.
In many acquisitions, in particular those of a cross-border nature, some local financing may be needed. We have assisted many clients in both clarifying their exact needs and aligning that need with what is available locally. This can vary significantly by country, both in terms of how well developed the funding market is and also what is available under local laws. For example, asset-based lending packages can vary significantly across Europe due to differing laws impacting what is available as security and how that security is managed.
We understand these issues and our own knowledge and contacts in London, combined with those of its ERS network around Europe, provide a powerful resource for clients looking for finance.
Notes, insights and reflections from Matthew, one of our directors and turnaround experts, as he works with companies during Lockdown.