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Leadership
By General Sir Peter Wall, of Amicus
WHEN you are considering acquiring a business, it is usual to conduct due diligence on the financial and commercial aspects of the proposition to understand the prospects of a strong return on your investment, and to ensure that all regulatory and legal aspects of the potential acquisition are in order.
Less common, but equally important, is conducting similarly rigorous due diligence into the people you are depending on to run the business.
In the past it may have been easier than it is nowadays to achieve value growth through financial restructuring and tuning of the commercial proposition; that lower-hanging fruit has long since been gathered in most cases.
Most portfolio owners agree that value creation depends on a wider view of tuning up a business and that the quality of the executive team, their motivation and commitment, and their ability to mobilise employees behind a clear purpose, vision and set of defined and achievable goals is critical to sustainable growth.
In Amicus, we have worked with businesses who see the multiple of net profit (or EBITDA) as the sole indicator of value at sale, and they have been happy to overlook their people’s motivation and commitment to swell those numbers, by clamping down on conditions of service and perks. The ensuing loss of mojo across the workforce has done nothing to commend the business to potential buyers – and, unsurprisingly, it has served to destroy value rather than enhance it.
Both the acquirer and the business itself can benefit from a diagnostic intervention to understand the quality and strengths of the leadership team, its cohesiveness and resilience, and its ability to relate to the workforce and lead high performance.
For the acquirer, it provides confidence that the “value at sale” level of performance will be sustainable and the talent exists for growth. For the chief executive or managing director, it highlights areas for improvement that any business would benefit from, for example team dynamics and chemistry, adherence to professed culture and values or executive and managerial accountability for key outcomes.
At Amicus, we have extensive experience of workforce diagnostics with special emphasis on the top team, the people who ultimately drive the performance of the business and define the chances of creating greater value.
