What is Acquisition Assurance?

Acquisition Assurance is a practice of collecting, structuring and recording information about product / portfolio value proposition during execution of business acquisition transaction.

Why Should Businesses Consider Acquisition Assurance?

Acquisition assurance is a response to an issue of product value proposition dilution due to departure / attrition of key staff after acquisition. This is valid risk for businesses that practice acquisitions as their growth strategy, since staff attrition is common scenario post-acquisition (cultural differences, pursue of other career options, retirement and other reasons). If proper knowledge transfer about the product portfolio value proposition is not performed, host companies face risk that acquired companies get off the course and loose relevance on the marketplace, thus compromising revenue.

This issue is further complicated by today's high revenue expectations by investors. Businesses are expected to boost sales of acquired companies by leveraging production synergies, economies of scale, well developed distrubution channels and generally larger customer base. This is reflected in high double-digit acquisition multiples that set pressure on host companies to ensure high performance of aquired businesses. Attrition of key personnel constitures significant risk for delivering on these expectations.

Acquisition Assurance mitigates this risk by capturing knowledge and all available information about product portfolio value proposition as early as possible during acquisition process, thus preventing materialisation of the value proposition dilution risk at any point post acquisition.

The principal factor for considering Acquisition Assurance is internal knowledge and expertise of customer base of acquired business. If there's little or no expertise in problem domain of target business then Acquisition Assurance should be considered as it will ensure that all critical knowledge about customers' business cases becomes integral part of host company.

Benefits of Acquisition Assurance

In addition to mitigating risk of product value proposition dilution, there are number of other substantial benefits that Acquisition Assurance practice brings:

• Lean Product Development
  Delivery of products and services that are laser-sharp focused on consumer expecations ensures best use of organizational resources.
• Positive Customer Experience
  Strong focus on consumer expectations and lean product development results in better product quality for consumers. This in turn contributes to higher NPS and, consequently, secures more business.
• Competitive Advantage
  Complete consumer satisfaction at right development costs effectively closes the "gap" for pontential competitive entry.
• Revenue Growth
  Staying relevant in the marketplace means ability to satisfy consumers' demand and enables win of customers' business. In other words, buying decisions are not delayed until better offers on the market emerge. Additionally, clear value proposition enables sales and account management teams to communicate product value to customers more efficiently thus positively contributing to win rate.
• Increased Business Profitability
  Increased revenue / sales volume combined with reduced product development costs ensures highest profitability of acquired business.
• Disruption Agility
  Profound understanding of customers problems and business cases behind acquired products allows executive and product management teams to properly assess and effect quick respond to market disruptions.

What Are Symptoms of Value Proposition Dilution?

Here are typical symptoms that indicate high probability of value proposition dilution:

• Slower Revenue Growth
  The first sign that value proposition might have been diluted is slowed-down revenue growth. As gap between customer expectations and product quality starts to develop, customers delay purchasing decisions concerned about value-for-money and looking out for better alternatives on the market. This delay gets reflected in slower win rate and, consequently, on revenue growth rate.
• Frequent Changes of Target Personas
  Frequent changes of target product personas (typically at least once within fiscal year) is strong indicator of value proposition loss. While it is standard practice to pivot products around different target segments, frequent changes of products' target persona within a year results in half-backed features of low quality that neither of the considered target groups can utilize effectively — thus losing precious development cycles and failing to exploit emerging market opportunities.
• Loss of Recurring Business / Renewals
  When customers see that products no longer meet their requirements they start to seek next best available alternative on the market or cancel buying decision altogether. Attrition of loyal or long-term customers is particularly strong factor that raises concern about validity of product value proposition on the marketplace.

How Does SBC Help?

SBC helps when capacity of internal resources is not enough to ensure quality business acquisition and integration.

Indeed, it's hard to predict when that next exciting acquisition opportunity comes in and that internal teams are available to take on acquisition and integration effort. Chances are that executive and product teams are preoccupied with internal initiatives and improvement programs that prevents them to jump on this acquisition opportunity in full capacity. We identified this problem and this is where SBC comes in.

SBC helps by:

• Quickly deploying right expertise necessary to perform Acquisition Assurance right
• Leveraging Acquisition Assurance best practices within and across industries
• End-to-end coverage of a particular Acquisition Assurance work-steam

What Is Acquisition Assurance ROI?

We believe that employment of Acquisition Assurance (either internally or via consulting services) is an investment — in a sense that costs associated with Acquisition Assurance effort are compensated by increased revenue / business volume and lowered product development costs.

Specific ROI numbers vary between particular cases, but generally is expressed as revenue gain enabled by Acquisition Assurance (see "Measuring Acquisition Assurance Impact" below) over the costs related to execution of Acquisition Assurance activities.

General Acquisition Assurance ROI numbers will become available as the practice gets wider adoption within M&A industry.

How to Measure Acquisition Assurance Impact?

Success of Acquisition Assurance is measured by how many times executive and product teams refers to Acquisition Assurance assets, particularly at the times of post-acquisition revenue stagnation.

Acquisition assurance is worthwhile investment if by referencing Acquisition Assurance documentation / reports the executive team was able to adjust product / business direction for continuous revenue growth.

Similarly, business costs of not performing Acquisition Assurance can be calculated as the increase in revenue after the business course correction — that is revenue gain is essentially what business would have lost without that course correction.