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Educating Sellers Through Organizational Due Diligence

Educating Sellers Through Organizational Due Diligence. MBBI Evening Meeting June 19, 2003. WHAT IT DOES P&L, Balance Sheet Analysis Scrutiny of expenses Re-casting of profits Evaluation of integrity of record keeping Tax implications of sale . Financial Due Diligence. What It Misses .

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Educating Sellers Through Organizational Due Diligence

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  1. Educating Sellers Through Organizational Due Diligence MBBI Evening Meeting June 19, 2003

  2. WHAT IT DOES P&L, Balance Sheet Analysis Scrutiny of expenses Re-casting of profits Evaluation of integrity of record keeping Tax implications of sale Financial Due Diligence

  3. What It Misses Leadership evaluation Market trends versus expertise Operational undercurrents Organizational alignment Capacity for change

  4. What’s in it for the seller? • Should I sell now, or in a few years? • What can I do to improve my purchase price?

  5. Leadership: Vision and Strategy • There a coherent vision for the future • There is a strategy for executing the vision • Short, intermediate, long-term goals • Senior managers believe strategy leverages competitive and addresses weaknesses

  6. Leadership:Communications • Effective “top-down” communication • Good “bottom-up” communication • Communication is respectful, open, and frank • Conflict is handled constructively in an atmosphere of good will

  7. Leadership:Style • Sr. managers have complementary styles • Sr. managers utilize their strengths and underplay their weaknesses • Sr. manager skill sets are aligned with strategy requirements • Sr. managers seek new learning and “walk the talk” in their organization

  8. Sales and Marketing:Marketing • Marketing plan systematically identifies growth opportunities • Marketing plan has an articulated process for expanding business with current accounts • Marketing plan has an articulated prospecting process

  9. Sales and Marketing:Sales • Selling process is integrated with marketing plan • Well trained sales personnel effectively conveys value proposition and closes business • Customer satisfaction is tracked and incorporated into sales efforts • Sales and marketing people have team or individual bonus plans tied to growth

  10. Operations:Quality and Productivity • Product/service quality system efficiently addresses errors and implements corrective action • Quality and customer service are firmly embedded in the culture and considered everyone’s job • Continuous efforts are made to take steps out of processes • Team-based or individual recognition for quality and productivity gains

  11. Operations:Asset Management • Management accountability for performance of key asset categories • Asset categories are measured in relation to quarterly goals • Strategic component to purchasing evaluates new ways to reduce costs, improve value added services

  12. Operations:Information Technology • Computer system is current, well supported by IT professionals • Information management is flexible and easily tracked. Report generation for various departments meets the “Goldilocks” test • Training/skill certification program in place ensures that system capabilities are being well utilized • Attractive website and good knowledge of PC skills in available within company

  13. Employee Cultivation:Involvement • Systematic recruiting process with tracking of predictions. Reviews reward performance and punish mediocrity • Employees view management as able to give effective feedback and cultivating mastery in others. Key metrics are shared • Employees believe that training helps them improve their job skills • Good work is recognized and company promotes internal advancement

  14. Employee Cultivation: Benefits • Benefits are viewed positively • Benefits include health insurance with at least 50% employer contribution • Retirement plan is available • Employees have benefit options that increase flexibility • Investment in employees and their community is valued and expanded when times are good

  15. When can this help? • Organizational strengths are being masked by current economic cycle • Organizational “time bombs” exist that may blow up financial performance before the business is sold • Seller who has a definite number in his/her head now has a clear idea of what will needs to be done to get there • Broker strengthens relationship with prospective sellers by learning more about their businesses

  16. J J ennison ennison Associates Associates LLC LLC Robert M. Hoyt, Ph.D. 1953 North Howe Street Chicago, IL 60601 (312)-397-0321 bob@jennison-associates.com

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