[Fredie_Reyes]

Based on my experience, one of the reasons M&A fail is because of lack of operations DD resulting in overly optimistic management / investor expectations. For example, synergies have been identified and included in the valuation without sufficient understand they were feasible from operations / implementation point of view.
Operations Due Diligence however can be quite more complex than other DDs. On the one hand, it is not only industry/sector specific but company specific. On the other hand, operations personnel are usually not trained to conduct a DD.
In your experience, how do you acquirers address this topic?

[Shane Bullen]

Hi Fredie, I’m currently finalising an integration programme after an acquisition 3.5 years ago and can see where stronger operational due diligence (DD) would have lifted benefits realisation. A deeper understanding of operating models and processes could have informed the integration design and sequencing, bringing forward synergies. That said, differences will always exist; the challenge is implementing change without eroding the attributes that made the company successful to start with (assuming you’re purchasing a successful company). Easy to say, harder to do in practice.

[Charles Pederson]

Hello Fredie, in our organization, we have a very well defined process for Operations Due Diligence. Our challenge is quite the opposite of what I often see as we are frequently told that we are too conservative, as our integration numbers appear very high when Due Diligence is completed. However, all the integrations are tracked, and the Operations M&A group recalibrates after each integration, and our numbers are actually getting much closer to the actual costs. This does take time to look at several integrations, and analyze where the costs were off and why.

[Gilberto]

Hello Charles, interesting comment and to see that the estimates become more precise as you learn from the past. How long after the integration do you track these to identify deviations and for what period of time? Asking since it could be that estimates were too conservative / optimistic but it could also “just” be a matter of timing.

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