Mergers, acquisitions, and divestments need the best pit crews going

Ideally, crews that don’t require the car to stop at all!

The fastest Formula 1 pit crew record, of 1.82 seconds, was set by Aston Martin Red Bull Racing at the Brazilian Grand Prix in 2019. Red Bull driver Max Verstappen went on to win that race. In F1, every second counts.

With mergers, acquisitions, and divestments, every dollar counts. It’s a lot like F1, except it has the added challenge that the vehicle never comes to a complete stop. The M&A pit crew must do its work while speeding towards the chequered flag and keep going for the victory lap. Like motorsport, mistakes are costly, so the expertise and know-how of the crew are vital.

At every stage of a merger, acquisition, or divestment your team must include proven experts. Experts that can provide independent analysis and advice. They must be people who know how to design and implement a transition while the entity is still moving.

Deals can easily run off track, and often it is commercial relationships with third-party suppliers that cause problems. No matter what side of a deal you’re on, you need to be certain that all business-critical operations, big or small, have been accounted for, and transition plans are understood, agreed to, and acted upon.

Not only does effective management of procurement arrangements prevent mistakes, but it can also be critical to unlocking value in the deal in an expedited fashion.

Due diligence is much more than kicking tyres

In the pre-deal stage, a comprehensive commercial assessment must be developed, and resources mobilised; an activity referred to as Commercial Due Diligence. The assessment of third-party supplier arrangements not only validates the true status of the business need and contractual obligations, but also confirms whether value creation opportunities exist, and how to treat these and other critical commercial findings during the transition or separation.

The expertise required must facilitate benchmarking arrangements against industry standards along with deep commercial and technical experience, just as all F1 pit crews know the specs for these special vehicles and the race rules. Understanding production and distribution risks, as well as the prospective opportunities, link quite directly to assessing value. It must be frank, fearless, and independent advice.

A no surprises strategy is essential in fast, complex environments

A lot has to be in place for Day 1. A series of new contracts must come into effect, but they must be superior contracts, so that means serious and extremely well informed negotiations will have to take place beforehand. In many cases, a Transition Services Agreement (TSA) will act as a bridge until new value-creating contracts can be achieved.

Today, much of the complexity is around technology. Typically, there are many layers and service providers. Everyone involved needs to sign up for a ‘no surprises strategy’ to ensure Day 1 works. Again, the right expertise is essential to technology transition. Just as pit crews use qualifying races to prepare for race days, you know you will have to deal with complexities and challenges that arise with the technology. So, whether you’re tweaking an onboard system in a race car or separating an enterprise-wide system as part of a merger, acquisition, or divestment, you aim to ensure that there are no surprises on the big day.

Even in the victory lap, much needs to be done

Even as the champagne is flowing up on the podium, the pit crew is still hard at work. In the post-deal environment, there will be a restructuring of arrangements within and outside the entity.

Given so many deals are predicated on a synergy being created, there is a genuine challenge to make more than the sum of the parts you have now. Very early on, the new strategy must be socialised with all stakeholders, including supply chains.

There is much tactical work to be done to prove value can be created and, hand-in-glove with that is the responsibility to ensure the entity adopts the values of the new owner, and people will be enabled and resourced to perform at their best.

Of course, just with every Grand Prix, every deal is unique. The thing that distinguishes the best pit crews from the rest is that they leverage their expertise and apply their key tactics to success in the unique circumstances of each race.