Acquisition Assurance is a practice of collecting, structuring and recording information about product / portfolio value proposition during execution of business acquisition transaction.
Acquisition assurance is a response to an issue of product value proposition dilution due to departure / attrition of key staff after acquisition. This is valid risk for businesses that practice acquisitions as their growth strategy, since staff attrition is common scenario post-acquisition (cultural differences, pursue of other career options, retirement and other reasons). If proper knowledge transfer about the product portfolio value proposition is not performed, host companies face risk that acquired companies get off the course and loose relevance on the marketplace, thus compromising revenue.
This issue is further complicated by today's high revenue expectations by investors. Businesses are expected to boost sales of acquired companies by leveraging production synergies, economies of scale, well developed distrubution channels and generally larger customer base. This is reflected in high double-digit acquisition multiples that set pressure on host companies to ensure high performance of aquired businesses. Attrition of key personnel constitures significant risk for delivering on these expectations.
Acquisition Assurance mitigates this risk by capturing knowledge and all available information about product portfolio value proposition as early as possible during acquisition process, thus preventing materialisation of the value proposition dilution risk at any point post acquisition.
The principal factor for considering Acquisition Assurance is internal knowledge and expertise of customer base of acquired business. If there's little or no expertise in problem domain of target business then Acquisition Assurance should be considered as it will ensure that all critical knowledge about customers' business cases becomes integral part of host company.
In addition to mitigating risk of product value proposition dilution, there are number of other substantial benefits that Acquisition Assurance practice brings:
Here are typical symptoms that indicate high probability of value proposition dilution:
SBC helps when capacity of internal resources is not enough to ensure quality business acquisition and integration.
Indeed, it's hard to predict when that next exciting acquisition opportunity comes in and that internal teams are available to take on acquisition and integration effort. Chances are that executive and product teams are preoccupied with internal initiatives and improvement programs that prevents them to jump on this acquisition opportunity in full capacity. We identified this problem and this is where SBC comes in.
SBC helps by:
We believe that employment of Acquisition Assurance (either internally or via consulting services) is an investment — in a sense that costs associated with Acquisition Assurance effort are compensated by increased revenue / business volume and lowered product development costs.
Specific ROI numbers vary between particular cases, but generally is expressed as revenue gain enabled by Acquisition Assurance (see "Measuring Acquisition Assurance Impact" below) over the costs related to execution of Acquisition Assurance activities.
General Acquisition Assurance ROI numbers will become available as the practice gets wider adoption within M&A industry.
Success of Acquisition Assurance is measured by how many times executive and product teams refers to Acquisition Assurance assets, particularly at the times of post-acquisition revenue stagnation.
Acquisition assurance is worthwhile investment if by referencing Acquisition Assurance documentation / reports the executive team was able to adjust product / business direction for continuous revenue growth.
Similarly, business costs of not performing Acquisition Assurance can be calculated as the increase in revenue after the business course correction — that is revenue gain is essentially what business would have lost without that course correction.