REDESIGN PARTNERS. Redesign Roadmap

Transcription

1 REDESIGN PARTNERS Redesign Roadmap 1

2 Redesign roadmap In a structured model which has proven to work Sale Business Transformation Sourcing & Scanning Strategy development Acquisition 2

3 Challenging standard practice Transforming the business, targeting a specific buyer Standard practice: process redesign & financial restructuring Restructure: headcount reduction, overhead cost cutting Improve bottom line for valuation Get investment bank involved to limit risk of fire sale Pitch book that repackages the existing business plan Redesign Partners practice: Business Redesign = Business Transformation Target a buyer who is more likely to pay a higher multiple for a business that fits its objectives Transform the company, focus on a particular business, technology or segment to change the way the company is valued Evaluate high-growth markets and buyers in those markets. Target buyers that lack capabilities that the company has (Gap analysis) Redesign the business to best fit with the potential buyer 3

4 What is Redesign? Redesign: a defined set of actions to refocus the business model of a company on the highest margin business Bicycle: 0,5 * sales Lock: 1,2*sales 4

5 Redesign roadmap Sale Sourcing & Scanning 1. Dealflow sourcing 2. Redesign potential assessment 3. Risk evaluation 4. Valuation Acquisition 1. Due diligence 2. Negotiation 3. Structuring 4. Acquisition Strategy development 1. Market evaluation 2. Business Design Gap Analysis 3. Buyer targeting 4. Plan development Business Transformation 1. Due Diligence 2. Generate managerial support 3. Lead business transformation 1. Simulate new business plan for buyer 2. Highlight cost of alternatives 3. Negotiations 4. DD and Closing 5

6 Sourcing & Scanning Sourcing & Scanning 1. Dealflow sourcing 2. Redesign potential assessment 3. Risk evaluation 4. Valuation Goal Finding good opportunities Screening of opportunities on potential for value creation by Redesign Partners Assessing downside risk and value Tools Networking and events with banks, industry, etc. Market research / consulting Downside risk modeling Redesign valuation modeling Potential candidates High entry barriers: patents, brands, technology Option to change the business model, e.g. by focusing on growth markets and unique products to create higher valuation multiples Option to position business in optimal value chain of prospective buyer 6

7 Sourcing & Scanning 1. Dealflow sourcing Redesign partners has developed an extensive network in the Netherlands, Belgium and France and increasingly in Germany and the UK for specific Redesign dealflow 2. Redesign Potential assessment: Redesign partners has developed tools to quickly assess businesses on potential for value creation through Redesign (research, consulting, specific financial calculations, interview lists, HR assessments, etc) 3. Risk evaluation: Modeling of downside scenarios, asset sale scenario s and risk of negative cash flows based on expected acquisition price Evaluation of execution risk scenarios 4. Valuation: Modeling of base case and post Redesign value scenarios Write-up valuation document Decision on next steps 7

8 Acquisition Acquisition 1. Due diligence 2. Negotiation 3. Structuring 4. Acquisition Goal Minimizing risk of skeletons Buying / investing at lowest possible cost Strong legal and financial structure Tools Consultants / accountants / I-bankers Experience with specific partners Extensive sale-experience shapes acquisition structures Redesign Partners-specific Commercial DD in-house, with consultants 8

9 Strategy development Strategy development 1. Market evaluation 2. Business Design Gap Analysis 3. Buyer targeting 4. Plan development Goal Identify the highest potential for value creation Develop Redesign plan that creates optimal value for the prospective buyer Tools Business Design Gap Analysis Research and consulting in cooperation with partners Track record of Redesign planning in >20 Redesign projects with a total value creation of > 3.5bn Example Redesign plan contents Sell strong units and Redesign underperformers Split non-related/non-core activities off Buy necessary products / companies to fill gaps Reposition according to new strategy Quit delivery to loss making clients and segments Minimize overhead and other costs 9

10 Strategy development 1. Market evaluation Narrow focus to single / few segments based on previous analysis Identify highest-value segments, potential demand and change potential 2. Business Design Gap Analysis Examine individual players in each market under consideration Map customer segments and applications currently served by the company and competitors / each companies competencies Gauge likelihood of success of combination against potential value created 3. Buyer targeting Select individual companies that would most benefit from buying the company Choose top three based on extent to which business combination best fills gaps for high-growth markets 4. Plan development Develop Redesign Plan based on Analyses and targeted buyers Discuss and communicate plan with all key players 10

11 Buyer targeting The key is to find the business combination that best fills the gaps for high-growth markets Market focus (segments and applications served) In-house competencies Customer segments Geographies Channel Product lines Distribution Sales Force Production R&D Supply Logistics Parts Materials Company Buyer company partner US x Asia x Europe S. America x Geographic coverage map Availability of partner s production capacity reduces need for investments in company before sales Key assets for buyer s strategy 11

12 Business Transformation Business Transformation 1. Due Diligence 2. Generate managerial support 3. Lead business transformation Goal Building a new identity that is as attractive as possible to the prospective buyer Tools Chief Executive authority in all subsidiaries Relation with owner/shareholder and with banks is crucial Transformation of business Driven by focus on eventual buyer Each business becomes a separate company. Every possible obstacle needs to be removed. Redesign plans are executed systematically using project plans, milestones and frequent reports to shareholders. Enabling the right, getting rid of the wrong people 12

13 Business Transformation 1. Due Diligence Team starts with due diligence assessment as if it were buyer, evaluation the company across 12 categories Identify issues likely to be raised by prospective buyers 2. Generate managerial support Support line managers (lacking experience in managing transformation) by teaching change management techniques New Management and key staff join Redesign Partners team off-site to develop strategic plan into business plans Coaching on preparing financial targets, capability assessments and capital needs assessments and on establishing reporting metrics 3. Lead Business Transformation Redesign Partners team integrated into the business as managers owning key parts of the plan (CEO, CFO, key business management) Managers report on progress weekly Align employee incentive system Constantly clarify vision through clear communication (town meetings) 13

14 Management Financials HR Technology Product Market Competitors Marketing Sales Due diligence checklist selection Due diligence The team starts from a buyer s perspective Frequency of missed milestones? Operations governed by formal schedule with clear objectives? Effectiveness of communication channels? What is the quality of receivables? Are there any shareholder loans / guarantees? Are fixed assets overvalued? Are there future commitments from customers, investors? What is the quality of staff and staffing practices? What are the existing labour agreements and contracts? Defensible technology? Superior technology for sustained product development? Does the product have well-defined, unique features? Can next-generation, follow-on products be developed? What are the assumptions underlying market estimates? Do barriers to entry exist? Can the market accept new products? What are the features and benefits of competitors products? Do they have strategic alliances? Is there a complete strategic and tactical market plan? What is the full range of product applications? What is the cost model for selling and receiving products? Is the sales group motivated? Is there a group leader with product / customer experience? Standard practice: due diligence based Redesign Focuses Redesign Partners team on buyers perspective Identify issues likely to be raised Address these issues over the course of the Redesign effort 14

15 Communication and incentives The business plan is articulated through a number of communication tools and backed by incentives Mechanism Town hall meetings Arrival Redesign team Transparent messaging Promotions Recruits Talent Gaps Communication plan Creating a valuable business Objective Reveal redesign process and new resources brought to the business Demonstrate results of prior Redesign efforts Communicate message You ve been chosen to succeed and Change is necessary things will never be the same Create a more entrepreneurial organization Identify those unable to adapt via frequent performance reviews Reward the adaptable employees with retention bonuses Compen sation Work environ ment Manage ment style Changing sources of employee retention Pre RP Base salary Steady growth Role clarity Post RP Performance based incentives Fast growth Empower ment Weekly monitoring 15

16 Sale Sale 1. Simulate new business plan for buyer 2. Highlight cost of alternatives 3. Negotiations 4. DD and Closing 1. Simulate business plan Develop simulation of buyer s business plan of the combined businesses Demonstrate how reconfigured business fits 2. Highlight cost of alternatives Present alternative acquisition scenarios to highlight the risks and costs of other business transformation associated with alternatives Highlight time lag, costs and risks of building the redesigned business 3. Negotiations Negotiations with candidates successful due to mandate and detailed knowledge of playing field 4. Due diligence and closing 16

17 Cost of alternatives Redesign Partners highlights the cost of alternatives Show benefits of Redesign cost of alternative acquisitions Markets Markets Operations Company Buyer Exposure to new segments offers crosssales and revenue retention opportunities Overlapping capabilities create economies of scale Customer segments Channel Operations Design Manufac Logistics Sales Product lines New product lines create new revenue streams Lack of scale econom ies Unrelated business es requires risky restructur ing Customer segments Geographies Geographies Level of innovation Channel Product lines Y Design Manufac Logistics Sales Y cost of building capabilities Company Nearest rival Present time Time Build Costly operational incompatibi lities and lack of scale economies Cost of replicati on and risk of failure 17