Quickly Spot Hidden Opportunities and Risks
While the mechanics of operational due diligence are the same as they’ve always been, the importance of getting the process right has grown exponentially, right alongside deal multiples and risks. Gain the most valuable insights by concentrating your observations and analysis in the five most critical areas.
- Daily management. Look for good daily management practises including Gemba walks, visual management systems, and standard work. Evaluate opportunities to introduce daily management discipline or even embed a lean-based daily management system and quantify the potential gains. Most manufacturers can realise sustainable performance improvements of 15% or more by making key changes in this area.
- Souring and inventory. Search specifically for supply issues that are hindering production as well as immediate areas for process improvement, including S&OP and customer segmentation and profitability practises.
- Site leadership. Size up the change readiness of key leaders and understand potential flight risks. Find out if you will need to act immediately to bolster the technical and/or leadership capabilities of key personnel with training, mentoring, or coaching.
- Labour availability and best practises. Consider not just the number of open requisitions, but also employee turnover rates. These numbers may point to weak spots or areas of opportunity for quickly improving recruiting, hiring, and onboarding practises.
- CapEx/automation. Get a sense of the organisation’s attitude toward and ability to prioritise and support pragmatic technology investments. Cheque for opportunities to automate non-value-added work and free up employees for higher-value, revenue-generating activities.
Be fast. But be thorough.
Due diligence windows are as compressed as ever. But you can still glean invaluable insights when you focus on the areas and issues most likely to significantly impact top line value creation. For additional insight into the best ways to uncover opportunity and risks during operational due diligence, download our recent article, “PRIVATE EQUITY: Uncover Hidden Value and Mitigate Operational Risks Faster.”
