ChasmBridge

Customer Retention in M&A Integrations: Avoiding Dyssynergies in the Industrial Space Mergers & Acquisitions often lead to customer uncertainty and, worse, customer attrition. This can severely impact revenue projections and undermine the success of a deal. The term for this painful reality? Dyssynergies.   Achieving the desired synergies during integration requires more than just cost savings; it’s about ensuring your customers stay with you. Here’s an equation that sets the standard for success: 1 + 1 = 2.2 (minimum). Anything less means we’ve failed to retain customers—and that’s fully within our control. Read the full blog, including the key steps for retention on our website: https://bit.ly/3WWmDba #MergersAndAcquisitions #CustomerRetention #Synergies #BusinessGrowth

In the next installment of our series on why M&A deals fail, we address cultural clashes. Cultural differences can lead to conflicts and inefficiencies during M&A integrations, affecting morale, turnover, and productivity. Here are key tips to effectively address these challenges: 1. Invest in Culture Due Diligence o Include activities to identify potential cultural clashes. o Focus on people: conflict management, accountability, communication, collaboration, DEI, and organizational purpose. o Focus on processes: decision-making, technology, excellence standards, stakeholder focus, and innovation. o Understand cultural differences in global organizations: Asian (reactive), Latin/Middle East/African (multi-active), and Western (linear active). 2. Conduct Post-Day 1 Culture Analysis o Utilize tools to measure cultural facets of both companies. o Align integration programs where cultures match and adjust where clashes are significant. o Engage leaders and employees in ongoing communication and change management. Share the data to demonstrate ‘the why’. o Define and build the desired culture intentionally through the integration period and beyond. Remember, a strong culture takes years to build but can be quickly dismantled in a manner of months. Prioritize retaining people and customers for successful integration. If you’ve missed previous posts, head on over to our blog to catch up! https://wix.to/PF5AGlG #diversity #culture #mergersandacquisitions #dei

Last week we dug deep into the second reason M&A deals fail to deliver – Poor Due Diligence. This week I’m looking at – Integrations Challenges. Integrating two companies is complex and can be mishandled, including IT systems, manufacturing and service operations, processes, and organizational structures. This disruption can affect operations and management focus. Here are some tips to address integration challenges effectively: 1. Build a Detailed Integration Plan: • Functional and Locational Specifics: Clearly outline “what is staying the same” and “what is changing and when” from Day 1 through the end of Year 1, including tactics, timing, accountabilities, and critical path dependencies. • Organizational Structure: Define reporting lines, roles, activities, deliverables, and goals. • Address Complexities: Include how new equipment is sold and delivered differently from the aftermarket activities (including rental if applicable) to support the customer. • Deliver Synergies: Ensure synergies that drove valuation are realized within expected timelines, setting priorities for each 90-day period and integrating them into the plan. 2. (Over) Communication Plan: • External Stakeholders: Ensure clear communication with customers, suppliers, and channel partners to avoid revenue loss through the integration period. • Internal Communication: Maintain consistent messaging and behaviors across execs, management, and supervisors to retain key personnel in both businesses. Walk the talk. 3. Integration Leader and Team: • Assign a Dedicated Integration Leader: This person will be accountable for the integration project, deliverables, and addressing challenges. This role can be 9-12 months depending on the integration's size and scale. Quarterly updates to CEO and Board are recommended. • Adaptability: Develop a plan how the leader and the team will adapt the integration approach, pace of change, other to stay on track when challenges arise – because they will. Integrations are complex and are one of the most difficult things we do to grow our businesses and market share. Challenges include the intangible - motivating people, engaging people to believe in the vision and the required changes that are being implemented. And we can all agree – these integrations never go ‘to plan’… I hope you’ll check our feed next week for tips on addressing Cultural Clashes. #mergersandacquisitions #businessgrowth #industrial

Today we're offering the 2nd half of our Poor Due Diligence thread. Here are tips 4-6: Legal and Compliance Review – ensuring legal and regulatory compliance through: a. Regulatory Compliance: Verify adherence to industry regulations and standards especially as it related to product design, certifications and testing. b. Litigation Check: Check for any ongoing or past litigation that could impact the company. c. Intellectual Property: Review the status and protection of intellectual property assets including engineering drawing controls and security along with controls over pattern and tooling that may be in located elsewhere in foundries or forge shops. 5. Market and Competitive Analysis - understand the market and competitive landscape especially if you are investing in a market, you may not operate in today. a. Analyze the target company's position within the market and its competitive advantages. What market share do they have vs. competition. Competitive intensity? Barriers to entry? Unique value propositions difficult to replicate? b. Customer Base: Evaluate the diversity and stability of the customer base. What is the revenue concentration of their top ten customers over past three years? What kind of seasonal trends are exhibited in the past three years performance? c. Market Trends: Dig in and educate yourself on market trends, competitor trends including technology and service offering trends that could have potential impacts on the target company. d. What new products or services are planned for launch in next 12 months? How are those planned, developed and commercialized? Research potential competitor responses to the launch of these new product-services. 6. Expert Consultation - hire industry experts to gain insights into legal, compliance, operational and market-specific risks. They may include product-market specialists, financial, regulatory and environmental. By implementing these strategies and tactics, you can mitigate the risks associated with poor due diligence and increase the likelihood of a successful M&A investment in the industrial sector. Next week we'll dive into Integration Challenges! #BusinessGrowth #DueDiligence #RiskManagement #MergersAndAcquisitions

Check out the latest in our series to improve M&A deals in the industrial space. This week we are attacking themes leading to poor due diligence. Check it out!!

We're back after a hectic post-Beryl week, and we're ready to get back to business - specifically, the continuation of our series on why M&A deals fail. This week, a dive in into Poor Due Diligence. Poor Due Diligence: Inadequate due diligence can lead to unexpected liabilities, overvaluation, and a misunderstanding of the target company's actual financial health and operational challenges. To combat the issues related to poor due diligence in industrial M&A transactions, consider the following tips: 1. Conduct a Comprehensive Financial Analysis – conduct an in-depth financial analysis. a. Review Audited 3-yr Financial Statements b. Examine Cash Flow Analysis to understand liquidity and cash management. c. Assess all existing debts and liabilities, including off-balance-sheet items. d. Validate inbound inventory purchases and timing. e. Validate inbound rental equipment purchases and timing. 2. Operational Due Diligence - Investigate the target company's operations thoroughly. a. Perform site visits to key facilities to assess operational efficiency and capacities. This will include visuals on safety practices, examples of lean in action including visual production flow. b. Analyze the supply chain for potential risks and dependencies including supplier on-time delivery, cost of quality and responsiveness to production issues. c. Evaluate the current technologies employed, the age of these technologies and other infrastructure and how these various systems are integrated to drive operational efficiencies. d. For rental businesses, analyze fleet, age and utilization rates. Verify seasonal trends. 3. Expert Consultation - hire industry experts to gain insights into operational, aftermarket and field services, inventory and rental operations. They may include product-market-operational specialists with know-how in new equipment, aftermarket and rental operations. More on this hot topic later this week! #IndustrialM&A #BusinessGrowth #DueDiligence #RiskManagement #MergersAndAcquisitions

Happy Fourth of July from the ChasmBridge team!

Jackie Herrera, CMO & BridgeBuilder will be speaking at this year’s Empowering Pumps & Industry Conference (EPIC) on November 12-13th in Golden, CO. This 2-day conference features industry tours, a manufacturing happy hour, a full day of engaging lectures, discussion panels, and interactive breakout sessions covering; Leadership and Strategy, Innovation and Engineering, Sustainability, and Workforce Development. Jackie will be speaking on the Manufacturing Influencer Panel at the event – and sharing how ChasmBridge is making huge strides in this world. Registration is open, and we’d love to see you there! http://bit.ly/3VK7Uzp #EPIC2024 #manufacturing #sustainability

Last week we looked at statistics around Industrial M&A that cause businesses to fall short of their financial goals. This week we’re jumping into the reasons why – there are seven, and here’s the first one: Overestimation of Synergies: Companies often overestimate the synergies that can be achieved through an M&A investment. This includes cost savings and revenue enhancements that might not materialize as expected. Top 3 Things to Combat Overestimation of Synergies: 1. Seek Expert Insights: As confidentiality allows, gather insights from internal experts and unbiased third-party experts to provide data and insights on market trends, competitors, and technical and operational know-how. This helps form solid, quantifiable baseline assumptions that stand up to scrutiny for each synergy model analyzed. These assumptions, when grounded in reality, will support effective planning and execution. 2. Develop Detailed Tactics: Plan and develop detailed tactics, including activities, deliverables, timelines, and accountabilities to deliver the synergies. 3. Have a Plan B: In the heat of the battle, many fall into the trap of assuming "everything will go flawlessly." Build a robust risk assessment and mitigation plan for each synergy deliverable. There’s more to come next week, but if you’re already thinking you’d like a one-on-one to learn more, send us a message. And visit our website www.chasmbridge.com for an in-depth look at how we can help your company bridge the chasm. #Industrial #BusinessGrowth #Synergy #RiskManagement #MergersAndAcquisitions

Bringing two companies together and integrating them successfully is one of the most difficult challenges in running and growing our businesses. The failure rates to achieve financial goals make for a steep climb. Many mergers and acquisitions (M&A) deals fail to meet their financial goals due to a variety of factors. Check out these statistics: • Harvard Business Review: Reports that between 70% to 90% of M&A deals fail to meet their financial objectives. • KPMG: Found that 83% of mergers fail to boost shareholder returns. • McKinsey & Company: Indicated that around 70% of M&A transactions fail to achieve the expected revenue synergies and value creation. Over the next few weeks, I’ll look at seven of these failure modes in the context of Industrial M&A and provide tips that may prove useful. Sound helpful? I encourage you to follow us to learn more.