Merger & Acquisition: Manufacturers Accelerate their Time to Value with Help from Synergy Resources
Part 2 of a 2-part Q&A series with Michael Canty, Executive Vice President at Synergy Resources.
Q: How often does Synergy Resources do this kind of work?
Michael: It’s a regular part of our business. Over the years we have worked with dozens of companies that were involved in mergers and acquisitions. We are proud of the expertise our staff has exhibited and the value they have provided to the organizations we have worked with.
Q: Can you talk about when Synergy Resources engages during the acquisition process?
Michael: On several occasions we have worked with investment companies during the assessment phase, but Synergy Resources usually engages around the midpoint of the acquisition phase or after the acquisition has been finalized. It’s a confidential process.
When a time frame for the acquisition becomes better known, the investor will ask Synergy Resources for advice. What should they prepare for? How can the business be brought in line with the other businesses that are owned by the investor?
Synergy Resources does what it can in advance so that we can go in and do an assessment as soon as the deal is done. We look at the kind of business and the business processes in place as well as the performance reporting tools. We then make recommendations on how to bring the acquisition in line with the other businesses that they own. Once we are all on the same page, we help to execute the plan.
Q: Do investors focus their investments on specific industries or do they venture across industries?
Michael: Investors do both. Synergy Resources works with some investment firms who prefer to acquire complementary companies within specific industries. Then there are those that are strictly investment. They might own five to ten different types of manufacturing companies in different industries.
Q: How does Synergy Resources accelerate investor’s time to value from their acquisitions?
Michael: Typically, we’re first looking to stabilize the business. Limiting risk while keeping a sustaining business flowing is very important in the early stages of integration. So, we work to understand the people who are running the business. During this phase we are looking to determine if it is a process driven or people-driven company. People-driven companies are at higher risk during the integration period. If you have someone in the company who understands critical process steps or is in possession of tribal knowledge about the company’s operations risk is immediately interjected in to the business. And if that person leaves the Company, the risk becomes a reality.
Synergy Resources can help manufacturers implement processes that lessen their dependence on the judgement of one or more people in order to minimize this risk.
Then we look to standardize operations and reporting across all locations to gain efficiencies and consistency. A business process cannot be improved until a standard exists from which benchmark data can be established.
And finally, we look to improve business processes to drive even greater efficiency and higher profits.
Here we are looking for redundancies or gaps in the manufacturer’s business processes that might cause errors or mistakes. We work with the investment company to act on our findings and improve performance.
Q: In your experience, what might be frequently overlooked by the investment-owned company?
Michael: The gap between the investor’s due diligence and the acquired company’s reality is usually not huge, but quite often inventory is an area that requires greater scrutiny. Inventory is a financial asset, but Synergy looks at inventory as a liability. Here’s why.
You might know the value of inventory but you might not know when that inventory is going to be used. For example, let’s say that inventory has been valued at $3 million. Depending upon how frequently the inventory is consumed by plant operations, it could be that, say, 10% is obsolete. That’s a $300,000 problem!
Inventory is often a challenge for the investor because you can’t really get the whole picture until you dig deeper into the manufacturer’s operations. That’s what Synergy Resources does. We take a very close look at the inventory including Work in Process on the production floor.
Q: What else do investors look for?
Michael: Investors want to know how sustainable the business might be. Is it efficient? Is it scalable? At the end of the day, investors want to grow their investments. Synergy Resources can look at entire operations and find innovative ways to help manufacturers scale their businesses.
Q: How long does the typical engagement take?
Michael: Depending on the size of the business, Synergy Resources can usually complete the onsite assessment in two to four days. However, there’s a fair amount of work we do after the assessment and before we review our findings with the investment company.
Q: What else should investor firms know about Synergy Resources?
Michael: The people doing the assessments for Synergy Resources have been in manufacturing a long time. We know what to look for, we execute with the speed needed and we stand behind our work.
Does your company plan to acquire a manufacturing business in the future? If so, do you have a plan to accelerate the time to value from your investment and to scale the business?
Contact us to learn more about how we provide guidance during the Merger & Acquisition of Manufacturing companies.