Category Archives: Uncategorized

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.

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.

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.

The Value Of Pre-Close Operational Diligence In Mitigating Risks and Uncovering Hidden Value

Just like a quality of earnings (QofE), the use of operational diligence is growing in relevance and utilization. Identifying undisclosed risks pre-close is not about avoiding deals, rather it allows better clarity for the prospective private equity sponsor to negotiate well pre-close, and approach the deal with a more complete plan to address those issues post close. Identifying risks early in the diligence process is central to addressing those same issues before they achieve critical mass two or three years after closing.

Playing Blind:  The Impact of Uncertainty on the Field and in Business

Close your eyes.  Imagine you are a football player, stepping onto the field during a crucial game. The stakes are high, and the pressure is immense. Your heart races with adrenaline as you take your position.  You hear the thunderous cheers of the crowd. The energy is electrifying, and you are determined to give it your all.

But then, something strange happens. As the referee blows the whistle to start the play, you realize that you have no idea what the score is or how long you have been playing. The scoreboard is blank where the scores should be, and there’s no clock in sight to show how much time is left. You try to shake off the confusion and focus on the play ahead, but that nagging uncertainty lingers in the back of your mind.

Without knowing the score, you can’t gauge whether your team is winning or losing. You don’t know if you need to push harder and take risks to catch up, or if you should play it safe to maintain a lead. Every move becomes a gamble, and anxiety creeps in, making it difficult to think clearly and execute your plays effectively.

As the game progresses, you notice that your teammates are also affected by the lack of information. Some seem to be playing with a newfound sense of urgency, assuming that they must be behind. They take bold, reckless actions, hoping for a miracle comeback. Other players seem overly cautious, unwilling to take any chances, fearing they might jeopardize a potential lead.

The uncertainty takes a toll on team coordination too. Communication becomes fragmented, as each player tries to interpret the game’s situation based on their own observations. Without a common understanding of the score and remaining time, it’s challenging to work together seamlessly as a unit.  The absence of critical information begins to impact your individual performance as well. You find it hard to focus on the task at hand, and doubt clouds your judgment. Your confidence wavers, and you become hesitant in your decision-making on the field. Your plays lack the usual precision and timing, and frustration mounts as mistakes start to pile up. 

OK…you can open your eyes. Not fun, right?   Yet, this is the situation so many business leaders put their workers in… no posted metrics, no start-up meetings, no daily review.

The story of the football game without a known score or remaining time serves as a powerful analogy for business owners. It underscores the importance of having access to real-time data, analytics, and insights to make well-informed decisions.

At The ProAction Group, we understand that success in business hinges on making informed decisions backed by data-driven insights. Our mission is to help organizations thrive by identifying operational improvements, mitigating risks, optimizing procurement, and maximizing revenue and profits. In a rapidly evolving market, the ability to adapt and stay ahead is paramount, and that requires having a finger on the pulse of your company’s performance.

Much like the football player needed to know the score and time remaining to devise an effective game plan, businesses must rely on key performance metrics to make strategic decisions, and managers use key performance indicators to set appropriate expectations on the floor.  Our expertise lies in shedding light on the vital aspects of your business that might otherwise remain obscured. We provide the tools and insights needed to navigate confidently through the challenges, helping you stay agile and responsive.  

Furthermore, we work with your team to establish clear benchmarks of success, guiding you on what to measure and how to interpret those metrics effectively.

Education is also an essential part of our approach. We believe that arming your team with the knowledge of these key metrics empowers them to act decisively and collaboratively towards shared goals. By keeping everyone on the same page and speaking the same language of success, we help nurture a culture of achievement and continuous improvement.

The analogy of playing blind on a football field underscores the importance of having the right information to succeed. With our assistance, you can navigate the complexities of your business’s operational challenges with a clear understanding of your performance metrics, enabling you to seize opportunities, mitigate risks, and propel your organization towards lasting success. Together, let’s bring clarity to your path, so you can achieve remarkable results and secure a winning position in the market.  How can we help?

The Illusion of a Seemingly Stable Business

Gauging the stability of a business can be tricky.  Strong financial performance, high profit margins, and healthy balance sheets can create the illusion of stability, but these indicators alone may be masking underlying risks and vulnerabilities.  Believing your business is stable based only on these indicators can provide a false sense of security among business leadership and can lead to complacency on the shop floor.  Success can hide risk.

Stability is the foundation of practically every production metric… cycle time, lead-time, OEE, fulfillment rate – all depend upon stability.  A lack of basic stability prevents improvements from either taking place or being sustained – continuous improvement is impossible without a stable process.  Add to that, the fact that we tend to tolerate poor performance in the absence of a squeaky wheel, and you find that no squeaky wheel is a signal worth investigating.

How should a business gauge stability?  Many people (and lots of engineers) tend to mistakenly connect stability with a high quality rating or fulfillment rate, but stability is so much more than that.  You first need to recognize that stability has three separate components – predictability, sustainable outcomes, and consistent processes, and you need to realize that stability requires all three.

Predictability: Let’s say a manufacturer can’t or doesn’t measure OEE for their processes – without it, no prediction can be made for the output and the process is unstable.  Here’s another example – you talk with the CFO on the 25th of the month and they share that the company is on course to hit their plan for the month, but five days later you find they have missed the plan by 20%.  Not predictable, not stable.

Sustainable Outcomes: A sustainable outcome is one that continues to meet customer demands – quality is high enough, fulfillment rates meet demand, and cost is low enough.  If lead times for a company are growing, they may eventually start losing orders because of it, at which point it becomes an unsustainable outcome.  Sustainable outcomes are the result of robust systems that can respond to ever-changing market, supply chain, and employment needs, to name a few.

Consistent Processes: Consider this – at the end of an operation, employees conduct a final visual inspection and box up the items.  Each employee chooses the process they wish to use, and no employee has the same output as the others.  But there’s one employee who was clearly inspecting and packaging twice as much product as anyone else, but because everyone could choose to do it their own way, the impact of any good work was negligible.  If everyone were to follow the process used by the best operator, productivity would increase and production costs would be reduced.

If we’re all in agreement that predictability, sustainability, and consistency are the core requirements for stability, how does instability manifest itself in operations?  Here are a few indicators of instability:

Efficiency and Productivity: An operation isn’t stable if the output changes each time there’s a change in employees, shift, production line, supervisor, or facility.

Quality Control: An operation isn’t stable if you have to sort the outcome, inspect quality into the product, or if you’re not tracking rework and scrap. 

Cost Control: An operation isn’t stable if lead times are growing, parts are unavailable, or if absenteeism continues to be a problem.

Compliance and Regulation: An operation isn’t stable if a product (like a safety harness) fails to perform to specification, or if employees are at risk of injury. 

Risk management: An operation isn’t stable if any of the following risk conditions go unaddressed –

  • If your company is growing but your margins start to decrease when new products are added, or if you have anyone in management who doesn’t take off more than a day at a time, your operation is not stable (tribal knowledge risk)
  • If you don’t have a thoughtful hedging strategy or a history of passing on pricing increases to customers, your operation is not stable (margin compression risk)
  • If you don’t have alternate sources for your materials, or a secondary port of entry negotiated in your supply chain, or a disaster recovery plan, your operation is not stable (business interruption risk)
  • If your Emod rate (or EMR) is above 1.00 or if you don’t know what your Emod rate is, your operation is not stable (safety risk)
  • If your maintenance department spends more than 15% of their time on reactive maintenance, your operation is not stable (CAPEX risk)
  • If you don’t know your churn/loss rate, or which of your customers are vulnerable, your operation is not stable (customer loyalty risk)

Perhaps the greatest benefit of stability (predictable processes) is the ability to scale and grow your business.  When businesses have established and repeatable processes, they can more easily replicate and scale their operations.  This is particularly important when expanding into new markets, introducing new products or services, or onboarding new employees.

At The ProAction Group, we help businesses create reliable processes.  We work with leadership, management, and the employees on the floor to raise awareness for business stability and its connection to predictability, sustainable outcomes, and consistent processes.  Verifying the presence of these components in your processes is the key to true business stability.

Kevin Hofert Expanded Role

We are pleased to share that Kevin Hofert has been promoted to Vice President, Business Development and Sales Management.  In this expanded role Kevin is primarily responsible for driving revenue growth, acquiring and retaining clients, and ensuring successful project delivery.  Kevin will serve as a bridge between our consulting team and our clients, leveraging their expertise to build relationships and identify business opportunities that add value to client portfolios. 

Kevin has over 28 years of business management, engineering, and leadership experience, and has a proven background in operations management, design engineering, and overall P&L leadership.  His operating experience, engineering mindset, and the combination of his law degree and MBA, provides a unique perspective that will continue to inform his decisions and direction in this new role.  

Prior to joining The ProAction Group, Kevin was CEO for a large, midwestern sign manufacturer where he collaborated with ownership and financial institutions to expand operations to 2 additional states, taking the business from $29M in 2016 to $56M in 2019.  Throughout his career he has successfully integrated add-on business acquisitions and operational improvements, and has continuously managed a wide range of business risk reduction efforts.  Earlier in his career, Kevin held the roles of VP of Engineering, Chief Engineer, and construction field manager.

Please join us in congratulating Kevin on his promotion and wishing him well in his new role.

Kevin has an MBA from Keller Graduate School of Management, BS in Civil Engineering from the University of Michigan, and Juris Doctor from the University of Illinois-Chicago Law School.


Who could forget the 1983 comedy drama, “Risky Business” starring Tom Cruise in his breakout role.  Joel, the entrepreneurial title character, is plagued by unforeseen risks as he agrees to a less than transparent business plan to run a temporary brothel out of his parent’s home – all to pay for damage to his dad’s car.  Well intentioned – though fraught with risk!

Tom Cruise may have learned a lesson from his risky behavior.  The car in the lake became the least of his problems!  In business and in real life the risks are often subtle and can even masquerade as harmless or irrelevant facts of life.


Unrecognized risks do not get addressed.  We can have sympathy for people and companies that suffer the consequences of something they truly didn’t know about.  And that highlights an important point.  Intention and ignorance do not protect us from harm.  Sometimes the risk doesn’t show symptoms until late in the process. 

Risks identified early can be mitigated, planned for, and addressed.  On top of that, when addressing risky business early, the cure tends to be non-invasive, low cost and effective.  The secondary, and often overlooked benefit is that eliminating risk will provide collateral benefit in seemingly unrelated areas.

When assessing operational risk, even during a pre-close due diligence, we search for early risk indicators, especially in the following areas:

  • Safety
  • Margin Compression
  • Business Interruption
  • Unbudgeted Capital Expenditures
  • Obstacles to Scalability / fragility
  • Customer Loyalty / Attrition
  • Sensitivity to economic headwinds / black swan events
  • Over / Under Estimated Capacity
  • The Rabbit Hole (resources are being applied energetically in an irrelevant or unactionable area)

If none of the risks above got your heart pumping, you may skip the rest of this post! 

Examining risk is not just an exercise in avoiding pain or bad situations.  A clever and practical assessment of the risks can expose costly surprises before the deal closes.  Go in with your eyes open, your models accurate, and your value creation plan relevant.

And here is the punchline.  In 20 years of conducting operational diligences, we have never killed a deal.  Every risk, especially when identified early, has a solution… modest capital, some appropriate management attention, some one-time resources. 

The second punch line…  When done well, the inoculation to the risk provides its own ROI.  Addressing margin compression leads to increased margins.  Shoring up against business interruption risk will create new stability and increase capacity.  Increasing worker safety will help you scale.

Have you ever gone to bed one night thinking about how you are preparing to exit a deal and wake up to the reality that you have to, essentially, start over?  Margins are falling, quality issues popped up, a customer moved to a competitor.  The trick here is not to avoid unforeseen headwinds, or to avoid change.  The answer is to prepare to handle change.  We know more black swan events will come, and the vaccination is healthy, good, and available.

The ProAction Group has a team of professionals ready to turn on the proverbial flashlight… and venture into the dark spaces to provide knowledge of risks that are actionable and almost always – solvable.