Do you have FOMT? (Fear of Missing Targets?)

It’s already May and we’re halfway through second quarter…almost half the year is over.

How is it going? 

Will you hit your EBITDA goals? Your growth goals?

If you are a PE firm considering an exit, will you hit the multiple you want?

Fear of Missing Targets (FOMT) is real, but here’s the good news – it doesn’t have to become a self-fulfilling prophecy. There’s still time to affect your demonstrated results…heck, even your third quarter results, and The ProAction Group can help!

And the news gets better — we often discover that with a few tweaks, we can have a massive impact on EBITDA and valuation.  However, the time to act is now!  We can assist by:

  • Identifying operational opportunities that will increase EBITDA, capacity, and performance.  Incremental improvements that add up to big results.  Many of these improvements show up in EBITDA within 8 weeks.  Some take 3-6 months.
  • Performing the “Home Inspection” before the buyers do.  We will identify the issues and risks an informed buyer will integrate into their decision on how much to invest.  Then we can fix the issue before it even comes up.
  • Providing your team with the bandwidth they need to realize the investment thesis

No one wants to be the person that didn’t act soon enough to achieve the targets, nor is it healthy to experience sleepless nights trying to wrap your arms around what to do differently. 

The ProAction Group comes with the people, process, and tools to get the job done.  We’ll help you hit the targets, generate the value, and achieve your investment thesis.  Let us help.

To learn more, contact us today.

Navigating Late-Stage Risks in Acquisitions – The Impact of Timely Intervention

Acquisitions represent both opportunities for growth and potential pitfalls. While meticulous due diligence is typically conducted to uncover any lurking risks, some threats manage to evade detection. Early-stage risks are those that lay dormant for a while, until they reach their tipping point in year 2 or 3 of the investment cycle where they often derail the progress. Late-stage risks are those that have already manifested themselves by the time of acquisition and will pose a significant challenge. Undisclosed risks, early or late-stage, are the nightmares of acquisition teams, as they emerge from the shadows post-close, revealing their full impact on the acquired entity.

Logically, late-stage risks and their impact should be obvious to everyone, and they often are. However, their presence may be accepted as “part of doing business,” or may have persisted so long they are effectively “hiding in plain sight,” where everyone (including leadership) has grown used to their presence. Until appropriately addressed, these late-stage risks will remain undisclosed and will continue to impact the business. Their consequences will eventually become dire and rectifying them comes at an exorbitant cost – to your finances and your reputation.

These risks may include reliance on tribal knowledge, business interruption, margin compression, unplanned capital expenditures, cultural misalignment, or technological obsolescence. Regardless of their nature, the common thread among them is the damage they inflict on operations and the urgency they demand for corrective action.

The cost of rectifying late-stage risks is staggering. It involves not just financial resources but also time and effort, often leading to disruptions in operations and potential harm to stakeholders. Moreover, the negative consequences resulting from these risks serve as a wake-up call, prompting a scramble for remediation.

But what if there was a way to preemptively address these risks before they spiral out of control? Enter OpWise with The ProAction Group, a strategic ally for PE companies in navigating the treacherous waters of acquisitions.

OpWise, a people, process, and resource approach from The ProAction Group, uses advanced analytics, industry expertise, and a results-driven methodology to empower PE companies to identify risk before the deal closes, and plan to address them before they wreak havoc. This is a pragmatic approach to identifying risk and estimating the time, effort, and resources necessary to mitigate or eliminate risk during post-close integration.

Here’s how OpWise, with The ProAction Group, can be instrumental in averting late-stage risks:

Early, Pre-Close Identification:
OpWise conducts comprehensive assessments of target companies, uncovering potential risks and vulnerabilities early in the acquisition process. Initial costs to address the risks are modeled, as well as the impact they will have on financials. By shining a spotlight on these issues, we enable PE firms to make informed decisions and take proactive measures to mitigate risks (before they write the check).

Strategic Intervention:
Armed with actionable insights, we collaborate with PE companies to develop tailored strategies to address risks and operational improvement. Whether it’s optimizing processes, enhancing compliance measures, or fostering cultural alignment, we provide practical solutions to address late-stage risks and bring stability.

Timely Execution:
We don’t just stop at planning; we ensure that strategies are implemented swiftly and effectively. Through meticulous execution and continuous monitoring, we help PE companies navigate the complexities of post-acquisition integration and mitigate risks in real-time.

Results Based Training:
Execution is not something we do to your team!  We use the opportunities to address risk or realize an improvement as a way to develop the team and find leaders hiding in plain site.

While late-stage risks may seem insurmountable, they are not inevitable. The ProAction Group can help PE companies identify and assess risks (early and late-stage) before the deal is signed and develop a post-close plan to mitigate these risks – safeguarding the investment and fostering long-term success by turning potential crises into opportunities for growth and resilience.

Successful Acquisitions Include Navigating Risks and Understanding its Nuances 

Acquisitions can be both lucrative opportunities and potential minefields of risks. Understanding and effectively managing these risks is crucial for success. Among the myriad of risks, it’s essential to differentiate between controllable and uncontrollable risks, as well as early and late-stage risks. This nuanced understanding can make or break an acquisition deal. At The ProAction Group, we specialize in helping private equity companies navigate these complexities, ensuring informed decisions and managed risks.

Controllable Risks: Taking Charge of Operational Safety

Controllable risks are those directly influenced by behavior and operational decisions within the acquired company. For instance, safety hazards such as bypassing safety measures pose significant controllable risks. These risks stem from failures in appropriate setup and maintenance protocols. Addressing controllable risks requires proactive measures, such as reinforcing safety protocols, implementing robust training programs, and ensuring diligent maintenance practices. By identifying and addressing controllable risks, private equity firms can enhance operational safety and mitigate potential liabilities.  Addressing controllable risk normally requires minimal capex.  It requires attention.

Uncontrollable Risks: Managing External Factors

In contrast, uncontrollable risks are external factors beyond direct operational control, such as political instability or natural disasters. While these risks cannot be prevented, their impact can be mitigated through proper planning and preparation. Establishing response plans and training teams to handle unforeseen events, such as chemical spills or extreme weather incidents, is essential. By preparing for disruptions, companies can minimize the adverse effects of uncontrollable risks and maintain business continuity.

Early-Stage Risks: Preventing Potential Dangers

Early-stage risks represent latent hazards that have yet to manifest into tangible problems. These risks often exhibit subtle signs, such as disorganized workspaces or inadequate safety protocols. Addressing early-stage risks is cost-effective and relatively straightforward, requiring proactive measures such as training initiatives and infrastructure improvements. By identifying and rectifying early-stage risks, companies can prevent potential harm and avoid costly consequences down the line.

Late-Stage Risks: Dealing with Immediate Threats

Conversely, late-stage risks are imminent threats that have already materialized, posing immediate danger to employees and operations. These risks are characterized by visible deficiencies and complacency, such as ignored safety protocols or neglected maintenance issues. Rectifying late-stage risks is significantly more challenging, time-consuming, and costly, often necessitating extensive corrective measures and rehabilitation efforts. By addressing late-stage risks promptly, companies can mitigate harm and prevent possible damage to personnel and assets.

OpWise with The ProAction Group – Informed Decision-Making for Successful Acquisitions

At The ProAction Group, we recognize the critical importance of understanding and managing risks throughout the acquisition process. Our expertise lies in identifying controllable and uncontrollable risks, as well as distinguishing between early and late-stage risks. By leveraging our insights and methodologies, private equity can feel confident about their acquisitions with clear understanding of their target’s risk dynamics.

Enhancing Private Equity Success: 5 Ways Organizational Development Can Improve Culture and Drive Profitability

For private equity, success often hinges on more than just financial metrics. The role of human factors, encompassing organizational culture and employee engagement, is increasingly recognized as a critical component in driving profitability and overall success.  In The ProAction Group’s role of operational due diligence, organizational culture and development is a key focus of our read-out to Private Equity clients.  We’d like to share five ways in which Organizational Development (OD) can be a strategic lever for private equity firms to foster a positive culture and enhance financial performance.

  1. Cultural Due Diligence – Beyond the Balance Sheet:  Before investing in a company, private equity firms traditionally conduct a financial due diligence. However, incorporating cultural due diligence into the process is equally vital. Understanding the existing culture within a target company helps identify potential risks and opportunities. A misalignment between the existing culture and the firm’s vision can hinder post-acquisition integration and impact long-term profitability.  Identifying the misalignment allows the firm to address it.  
  1. Leadership Development for Sustainable Growth: Effective leadership is a cornerstone of successful organizations. Private equity firms can leverage organizational development to identify and nurture leadership qualities within portfolio companies. Investing in leadership development programs ensures a pipeline of capable leaders who can drive innovation, navigate change, and foster a positive corporate culture. A strong leadership team not only enhances organizational resilience but also contributes to long-term profitability.  Our OpWise™ approach, builds on continuous improvement and leverages improvement projects to create a leadership development machine.
  1. Employee Engagement – A Catalyst for Performance:  Engaged employees are more productive, innovative, and committed to the success of the organization. Private equity firms should prioritize employee engagement initiatives during and after the acquisition process. Through OpWise™, firms will be able to gauge employee satisfaction and identify areas for improvement. Fostering a positive work environment not only boosts morale but also enhances the overall efficiency and effectiveness of the workforce.  The ProAction Group offers a more effective approach through continuous improvement and by involving employees in the transformation… our approach leaves the firefighting culture behind and leads to the development of a problem-solving culture.  Mic drop. 
  1. Change Management – Navigating Transitions with Finesse:  Private equity transactions often bring about significant changes within organizations. From structural reorganizations to new technologies, navigating these transitions requires a strategic approach to change management. Organizational development can provide the framework and tools necessary to facilitate smooth transitions, ensuring that employees adapt effectively to changes. By minimizing disruption and uncertainty, private equity firms can expedite the realization of value and drive profitability.
  1. Nurturing a Learning Culture:  In a rapidly evolving business landscape, organizations must embrace a culture of continuous learning. Private equity firms can play a pivotal role in instilling this mindset within their portfolio companies. Organizational development interventions, such as training programs, mentorship initiatives, and knowledge-sharing platforms, can foster a culture of continuous improvement. A learning culture not only enhances employee skills but also positions companies to adapt and thrive in dynamic market conditions, ultimately impacting the bottom line.

Private equity firms looking to maximize returns and drive profitability must recognize the integral role of human factors in organizational success. By incorporating Organizational Development strategies that prioritize cultural due diligence, leadership development, employee engagement, change management, and a learning culture, private equity firms can create a positive ripple effect throughout their portfolio companies. The ProAction Group, using their OpWise approach, can provide the operational insight needed to ensure your targeted investments in the human side of business will enhance organizational resilience and position the portfolio companies for sustained success.

The Dance of Organizational Development: Leading with Purpose and Precision

Audie Penn, Vice President, Business Development and Service Delivery

What exactly is development?  The root of the word develop, to unwrap, converges on a specific point.  For example, when I unwrap something, a gift for example, I find something specific.  A gift, if it is thoughtful, has meaning and importance.  The added benefit of unwrapping a gift is the association of the gift to the sender.  Now I have a permanent association of the gift and the giver, but the value of the item, if it is a good gift, still has significance to me.  I needed and wanted it.

The idea of general development gives me pause.  General development is like an unwanted gift that has no value to the recipient.  Why do I need this?  Do you notice something that I don’t?  Is this something you think I need in my work?  Are you disappointed in my performance?  What is it that I am missing? 

To avoid creating this spiral of negative thinking and worry, we must be precise in our development work. Development has a purpose, but we must be cautious with the idea of purpose.  A shared purpose is best; one that you and I both agree is necessary and desired (need and want from above).  If one suggests it is needed, but the other does not want it, the spiral is downward and lands in coercion.  However, if there is agreement and desire, the upward spiral has unending value.  What we learn in development creates its own forward momentum, and a continuous surfacing of opportunities and one learning leads to another and another and another.  This really is the fundamental power of continuous improvement or operational excellence. 

The dance between function and relation can be beautiful if the lead knows the dance.  Like the elegance of a dance partnership, the lead guides the partner to opportunity and watching the partner drift into intuitive interpretation of movement and purpose can be mesmerizing to those observing and can immerse the dancers into flow. Mihaly Csikszentmihalyi explores the 8 ideas of flow:

  1. Complete concentration on the task
  2. Clarity of goals and reward in mind and immediate feedback
  3. Transformation of time (speeding up/slowing down)
  4. The experience is intrinsically rewarding
  5. Effortlessness and ease
  6. There is a balance between challenge and skills
  7. Actions and awareness are merged, losing self-conscious rumination
  8. There is a feeling of control over the task

There is also a relationship between flow and innovation.  When we slip into a flow state, we can easily see relationships within our work that were impossible to notice when not in that state.  When the development process is working, and what we are learning we are also loving, the dance begins, the state of flow has opportunity to exist, and the innovations come more naturally.  As a leader, it is my responsibility to create these environments to release the potential of my team members and create a community in which everyone can flourish more fully.  When communities flourish together, immeasurable value is created.

Are we Deal Killers or Deal Enablers? Our Role as Consultants for Operational Efficiency in Buy-Side Deals

In private equity, successful acquisitions are not just about the numbers; they hinge on a thorough understanding of the inner workings of a target company. Operational consultants play a crucial role on the buy-side, providing operational diligence to private equity firms seeking to make informed investment decisions. At a recent networking event, a question arose: Are operational consultants like The ProAction Group deal killers or deal enablers? Let’s explore the impact of operational diligence on the delicate relationship between the seller and the buyer.

Understanding the Dual Role:

We are neither deal killers nor deal enablers in a simplistic sense. Instead, our consulting role is to uncover the intricacies of a company’s operations, highlighting both its strengths and challenges. This dual approach ensures a comprehensive evaluation, allowing private equity firms to make well-informed decisions that go beyond the surface-level due diligence.

Building Relationships:

One key aspect of our consulting role is to establish a strong rapport with the seller. By acknowledging the complexities and obstacles in the operational landscape, we connect with the seller by understanding the value they provide in meeting customer demand. We strive to demonstrate empathy and understanding. This builds a foundation of trust and openness, fostering a positive relationship between the seller and the buyer.

Recognizing Strengths and Challenges:

As operational consultants we don’t just focus on problems; we also celebrate the strengths of the seller and their management team. By acknowledging areas of strong commitment, effective processes, and impressive results, we seek to create a balanced perspective. Moreover, calling out the unique challenges the company faces demonstrates a deep understanding of the seller’s world.

Maintaining Discretion:

A crucial aspect of operational diligence is discretion. We refrain from discussing improvement opportunities with the seller, leaving the decision to share such insights to the buyer, typically post-closure. This approach ensures that the buyer retains control over when, how, and if they choose to communicate potential enhancements to the seller.

When we fulfill our role effectively, the buyer gains several advantages:

  • Meaningful Connection with Leadership: A thorough operational understanding provides the buyer with a significant advantage in connecting with the leadership team on a deeper, more meaningful level.
  • Clarity on Risks and Capex: We offer clarity on stability, potential risks, and the capital expenditures required to mitigate them. Armed with this information, the buyer can make informed decisions, potentially seeking relief from the seller during final negotiations.
  • Uncovering Hidden Value: We document opportunities for unlocking hidden value. This clarity aids the buyer during final negotiations, and managing concessions requested by the seller, fostering a mutually beneficial deal.

As consultants for operational efficiency we are integral to the success of private equity buy-side deals. Our nuanced approach, balancing recognition of strengths and challenges, builds trust and facilitates open communication between the buyer and the seller. We rely on our experience to provide a broader understanding of a company’s operations, empowering private equity firms to make strategic decisions that go beyond mere financial considerations, ultimately contributing to successful and mutually beneficial transactions.

Gary Spoerre Promoted to Director – Sales Enablement!

We are thrilled to announce the promotion of Gary Spoerre to the role of Director, Sales Enablement. Gary brings 29 years of invaluable experience in process engineering and management across diverse sectors such as manufacturing, electronics, software, education, and aerospace.

In his previous roles, Gary has demonstrated an impressive ability to lead teams, establish standards, and train personnel, resulting in enhanced production, reduced defects, and improved safety. Notably, during his tenure at General Dynamics, he successfully managed their learning management systems and the ongoing training of 400+ site personnel. His dedication to creating comprehensive documentation and providing effective training contributed significantly to a safer work environment and improved product quality. At Whirlpool/Maytag, he trained and counseled employees on product quality improvement, workstation safety, and continuous process improvement. Gary’s role in redesigning the production training program resulted in a significant reduction in rework, lowered injury risks, and increased employee cross-training.

Gary’s multifaceted expertise extends into the aerospace and software fields, where he coordinated complex electronics assembly projects, managed software installation and customer service teams, and developed procedures to ensure consistent customer satisfaction.

Gary holds a Master’s in Education from Southern Illinois University and a BS in Industrial Engineering. His military service as Petty Officer, 2nd Class (E-5) for the U.S. Navy and Sergeant (E-5) for the USARNG showcases his commitment to excellence and discipline.

Additionally, Gary is a Lean Six Sigma Green Belt and holds certifications in the Society for HR Management, Foundations of Project Management and Lean Systems Design.

Please join me in congratulating Gary Spoerre on his well-earned promotion! His wealth of experience and dedication will undoubtedly continue to drive success in his new role as Director, Sales Enablement. 

Audie Penn now Vice President, Business Development and Service Delivery

Congratulations to Audie Penn on his promotion to Vice President, Business Development and Service Delivery at The ProAction Group! With 38 years of extensive experience in various manufacturing environments, Audie brings a wealth of knowledge to his new role.

In his capacity as Vice President, Audie will play a crucial role in collaborating with clients to identify risk and implement value creation initiatives, ensuring that companies reach their strategic, organizational, and financial goals.

Audie’s diverse background, encompassing both consulting and industry roles, spans across industries such as furniture, food, heavy equipment, municipal functions, energy, and building materials. His previous role as managing partner for a consulting firm focusing on operational excellence showcases his ability to drive significant improvements, exemplified by the impressive EBITDA growth achieved for his clients.

Notably, Audie’s contributions as Group Manager for a global heavy equipment manufacturer led to surpassing performance expectations and a substantial reduction in variable costs within the first five months of his tenure. His expertise extends to supply chain management and global production system deployment, particularly in implementing Lean methodologies for performance enhancement globally.

Audie holds degrees in accounting and business management, along with an MBA from St. Ambrose University. He is also Master Black Belt Certified and holds certifications at the Gold, Silver, and Bronze levels through the Lean Certification Alliance. Currently serving as the chair of the SME Certification Oversight and Appeals Committee within the alliance, Audie continues to contribute significantly to the field.

The ProAction Group is fortunate to have Audie Penn in this leadership role, and his extensive experience and expertise will undoubtedly contribute to continued success and growth for our clients.