Value Creation/The Art of Due Diligence

A growing number of firms are adding functional and industry experts to their due dilligence team.

1. Include value creation in the due dilligence process.
In the past, risk mitigation was the primary focus of due diligence. Today, many M&A experts place equal importance on identifying value creation opportunities as part of the diligence exercise. Value creation diligence requires the buyer to have expertise in the target’s industry, customer base, operations, sales models and other functional areas. To address this, a growing number of firms including Arthur Nordlie and Company are adding functional experts to their due diligence teams.
2. Have a well-defined value creation plan.
Value can be created in may ways, including revenue growth, cost reduction, balance sheet engineering and improwing cash flow. However for many firms, the most important value creation strategy is to accelerate top line revenue growth. For most companies, driving top line revenue is far from a simple task – and one which often requires both an audit of the company’s external processes, such as their sales and operations, and external factors but perhaps most importantly the company’s understanding of its customer base. This is followed by a step-by-step action plan in
which the firm can help identify and act on the top handful of action items that will create the greatest value.
3. Build organisational performance into the value creation process.
Much has been written about the importance of identifying and retaining key talent when acquiring a company. Yet, this aspect of value creation has become more important than ever. In our view, the rate at which the world is changing, whether as a result of economic, technologic or other drivers, is forcing companies to respond at a much faster pace if they want to stay ahead. Success is really driven by the collective ability of an organisation to act quickly and adapt; and the quality of the interactions between the white-collar employees to collectively recognise emerging patterns at all levels, faster than the competitor’s organisation.
4. Invest in marketing an public relations to build value.
Today’s leading firms have also identified the value of  branding and public relations (PR) as a means to increase their companies value. Financial sponsors increasingly
realise that refining and shaping a company’s brand and raising awarness of the business among certain target audiences are vital ways to build value.