Technology is a core tenant of value creation in M&A says Dean Graves, U.S. CEO at Freeman Clarke.
“You can't, in our opinion, drive value and scale without the right technology applications and infrastructure in and across your business,” Graves said at the New York Smart Business Dealmakers Conference. “What technology provides is effectively your ability to see across your business, look at those KPIs, those business insights and analytics that empower you to develop the right qualified strategies and plans, and build confidence around what those strategies will relate to as it ties to your overall thesis and strategy that you're looking to drive towards.”
He says they focus on areas that they can affect from a top line revenue standpoint, such as different pricing strategies or additional ways to expand revenue opportunities in respect to product development and product expansion, how to engage the market from a sales and marketing perspective, as well as client engagement, client growth, client retention and client experience, and looking across the business to optimize the source-to-pay capabilities. Ultimately, the emphasis is on making the right decisions that ultimately give confidence that leadership not only sees the right things across the business, but give the right level of focus in the order of priority that will deliver the right ROI aligned to the overall thesis and plan to deliver value.
“A lot of our work begins with consulting around understanding the current state in a business and doing a thorough assessment of how the business is organized, what policies, procedures, governance and controls, and how the organization manages risk,” he says. “It's a full end-to-end review, and that's overlaid then with a practical technology roadmap with accountability that ties in an order of priority to the business imperatives that ultimately tie to that value opportunity.”
On the integration side, he says one thing to understand that is typical in the middle market across all sectors is companies and leadership are experts in what they do with competency and are focused on the sharp end of their business — they focus on why they exist, how they compete, how they differentiate, how they can continue to drive and grow their business. What most middle market companies lack and have not invested in is building out the right kind of infrastructure, technology platform, administrative function, with the right leadership from CIO or a CTO standpoint. That’s mainly because it's considered an expensive role to put into the business and typically technology is not a core competency. So, there is a perception of what is important versus what they do, enjoy and focus on.
“Part of value creation is, how do we introduce the right technology strategy to support the business, bring that right level of strategic leadership to the table to be the voice to the board that can translate technology into a business conversation, and then look to assess the business and derive and build and execute a technology strategy accordingly?” he says.
Then, when considering grow through organic and inorganic opportunities, he says if there are systems, the capability, leadership and best practices that constitute alignment to the direction the business is heading, there is great efficiency in integrating those opportunities into the business and driving arbitrage. The next step is to go down the value chain — from sales through managing risk — between the two firms to identify crossovers that drive either efficiencies, optimization, value, or how one might leverage another, either through geographic expansion, products and services and the like to cross-sell, up-sell, and drive greater value in and across clients.
“It begins with appreciating that most companies in the mid-market have high competency in why they exist and how they compete,” Graves says. “But the real opportunity is how to build out the right level of infrastructure that's right for them, that supports them today, that's aligned with the direction towards that North Star in terms of the thesis, but then has the ability to be agile and grow and scale with the business. Our operating point of view is, if you can see clearly across your business and you've got the right indicators communicating the right KPIs, it helps you in a qualified fashion make those right decisions, and you're able to report and operate and ensure that your business can achieve those things in lockstep with expectations.”
