In the first installment of this post, I posited that one factor contributing to disappointing results following a merger or acquisition is the flawed perception that transition services are not that important. I noted that this mindset may dilute the effectiveness of the post-deal enterprise(s) and result in unanticipated and unmitigated risks, lost or reduced revenues and/or interruptions of key business operations.
Let’s assume that you are sold on the importance of transition services. Even when transition is given appropriate attention, companies often suffer the perils of misguided implementation of the transition service regime, which may include:
- Insufficient planning;
- An undisciplined process;
- Inadequate diligence (not asking the right questions); and/or
- Incomplete or improper terms.
This installment focuses on how best to avoid these issues by adhering to a practical set of informed best practices.
Transition Services “Value Imperative”
Although there is no single “right way” to devise and execute a transition services strategy, there is one guiding principle that should drive any transition service regime. For the sake of discussion, I’ll call it the “value imperative,” which should advance three primary objectives:
- Help position the post-closing enterprise(s) to be at least as (if not more) competitive in the market(s) in which they operate;
- At a minimum, preserve (and potentially enhance) the valuation; and
- Enable the enterprise(s) to fully exploit the targeted synergies of the deal.
Put another way, the transition services should, at a minimum, “do no harm” to the value proposition being pursued, recognizing that the mechanisms for achieving this goal may differ depending on whether you are the seller or buyer (the recipient or provider of the transition services).
Implementing an effective transition services regime is as much about process as it is about substance. In this installment I explore the key attributes of an effective transition services process from the perspectives of both the provider and the recipient of these services.