Worst situation ever for PMI
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What are the worst situations that a PMI can find itself and how to solve it? Let’s imagine for example that the DD haven’t been done properly and the acquire discover some discrepancies and financials challenges. How the acquire can react ?
I only have heard of worst cases never experienced it myself. One situation was that DD was insufficient and only discovered after the fact that the manufacturing site and product for a Ph1/2 trial could not be used. This was a major setback both financially and even more from a timeline perspective.
I’ve worked in M&A approximately 10 years performing DD & integration planning (typically pass off the high-level integration plan to a PM).
Worst situation examples:
1. Post-Close, plus 6 mos., the senior leaders of the acquired company leave. This outcome can be driven by not assessing the risks of hiring a cutting-edge Silicon Valley thought-leaders to join a (I’m being a bit brutal) stodgy Fortune 100 company and dealing with all the “red tape”, capped salaries, etc. They acquired leadership have HUGE expectations of uncapped earnings… and suddenly they’re in a company which has “tons” of processes, requirements, etc. In this specific case, we were able to lock up the IP, but the exit of the thought leaders was a big Negative.
How would I’ve done it differently? a.) kept them independent b.) better managed expectations of earnings potential (pay for performance) c.) managed corporate people who essentially say “it’s my way or the highway.
2. A Cybersecurity breach -or- incident Post-Close. Typically, post-Close, there is a window of time, especially when there’s a public announcement, when the target may be at enhanced risk from a Cybersecurity perspective when acquired by a major firm. Without going into detail,… there is risk if there’s a public announcement of an acquisition, but the target may have some cybersecurity risks. Secondly, in the case of carve-out, and when a transition services agreement is implemented with the parent company, the acquired company, and potentially the acquirer can be placed at risk based upon the cybersecurity incident against the selling parent company.
Similarly, my worst PMI situation was the exit of key talent 9 months in. The owners and the key talent were different. The deal locked in the owners, who were not providing the new IP and were not the pr4imary client contacts. All the effort was on making the owners happy. This small firm was brought into a structured environment with defined roles and suddenly the key talent had to justify their time and focus on revenue. The DD completely missed the cultural integration piece and need to engage the key talent for continued success. The key staff left and took clients with them. It took three years for the profit center to recover.
This is insightful, thanks for sharing! Key learnings (reflecting similar themes from other threads) include ensuring a comprehensive DD process capable of identifying both critical operational details as well as complex people and culture change issues and what plans can be implemented to manage them. Miss either or both, and the deal’s value story can quickly turn into a sad tale.
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