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Preparing for your next strategic event starts now

next strategic event

There is no better time than the present to start preparing for your business’s next strategic event.  Irrespective of the type of event (e.g., sale, acquisition, merger / partnership, or IPO), there are fundamental activities that organizations should develop muscle memory for and commit to as foundational and ongoing preparation.  Assuming that the overarching goal is to someday be in position to present the company as an actual investment asset, the benefits of these activities will help the business in the present and lay the foundation for more organized proceedings in the future — e.g., Due Diligence evaluation, post-event Transition execution, etc.

Approaching these preparations requires commitment across the business (starting with Leadership) and a certain measure of organizational discipline.  The underlying tenets to the approach are basic if not overly simplistic — reinforcing the rationale to start on Day 1:

  • Be methodical.
  • Be (hyper) organized.
  • Be comprehensive.
  • Be deliberate.

Being deliberate — in this context — means setting and approaching these ongoing preparations with the mindset that there will be some type of strategic event down-the-line (even if that is not necessarily the stated longer-term goal).

The primary benefit of managing your business from this constant state of ongoing preparation for a strategic event is that, in many ways, it forces the organization to focus on the very things that help propel growth: organization/structure, efficiency, productivity, and quality.  An ancillary benefit may be increased value (perceived or otherwise) of your business as a function of how buttoned-up you are going into the Due Diligence evaluation, for example.  There is no downside to fastidiously planning, operating, and managing a business.  But the lack thereof could mean the difference in a seamless evaluation process, productive negotiations, or even an eventual transaction.  Finally, the downstream benefit of ongoing preparation is greasing the proverbial wheels for ease-of-integration between organizations and/or simplifying continuity-of-business operations following a transaction.

Areas of ongoing preparation for a strategic event typically revolve around documentation in all the varying formats available in today’s Digital-first world.  These can include but are not necessarily limited to the following:

  • Standard Operating Procedures (SOPs):
    These may be more applicable for organizations providing consulting or professional services to revenue-generating Clients / Customers often in the form of playbooks that document / describe the business’s specific approach or methodology to projects and engagements — some or all which may be a competitive differentiator and therefore proprietary.
  • Business Operations Processes:
    These may lean more towards internal processes specific to how a particular business operates.  Examples can include processes spanning resource management; new business development / sales; contracts; business reporting (i.e., analytics); marketing operations; product design, development, and go-to-market (GTM); etc.
  • Organizational:
    This is an all-encompassing bucket starting with the holistic overview of the business’s organizational structure (regions, offices, lines-of-business, departments / groups / teams) inclusive of employees and extending to independent contractors (1099) and preferred vendor partner relationships critical to the business.  Maintaining comprehensive employee information (Start-Date, Tenure, Title vs. Level, Compensation History, Last Performance Review, etc.) should be relatively simple and seamless given the various HRIS systems available today for organizations of all sizes.
  • Intellectual Property (IP):
    Where applicable, these IP rights should encompass (1) patents, (2) trademarks, (3) copyrights, and (4) trade secrets.
  • Legal:
    Albeit self-explanatory, the most important considerations here are to be thorough and up-to-date, and transparency should be the prerequisite for good faith negotiations.  Anything that could potentially warrant interpretation as covered by attorney-client privilege should be meticulously organized and maintained.  Examples include:
    • Business incorporation agreements
    • Corporate partnership agreements
    • Employment agreements / offer letters
    • Client contracts, purchase orders, customer subscriptions
    • Vendor Partner contracts
    • Professional Services (Legal, Accounting, etc.) contracts
    • Historical legal settlement agreements
    • Office leases
    • Software licenses
  • Financials.
    At minimum, the typical starting point will include:
    • Historical Performance: Balance Sheet as of December 31st (or fiscal year-end) for X number of years prior
    • Historical Performance: Audited P&L as of December 31st (or fiscal year-end) for X number of years prior
    • Current Performance: Detailed P&L for current year-to-date
    • Financial Projection: Detailed P&L for current year reflecting (1) Actuals To Date for officially closed months plus (2) Projections for remainder of year
  • Tax Records.
    At minimum, these should include the certified tax returns (as prepared by a reputable third party) for the past three (3) years or the lifetime of the business — whichever is shorter.  (Note – The number of years to be included may be fungible and subject to negotiation between parties.)  If appropriate and applicable, inclusion of a pro forma tax return for the current year (as estimated by a certified third party) may also be requested.
  • Information Technology (IT).
    This is an all-encompassing bucket that effectively provides a detailed audit of all systems (including cloud-based solutions), hardware, software (including SaaS), databases, and networks — which are actively owned, leased, subscribed to, maintained, or otherwise used by the business in some capacity.  Custom applications developed in-house would be part of this and may even have IP considerations depending upon the scope, scale, and commercial usage implications.

There is a plethora of technology solutions available today to support documentation.  When selecting a solution, key consideration criteria or table stakes should be (1) ease-of-use; (2) ease-of-updating; and (3) ease-of-transfer when delivering documentation to another party.  As such, the decision will likely come down to whether or not the solution works for your business and the employees comprising the organization.  Most importantly, avoid scapegoating the solution / tool (or lack thereof); this starts with a commitment to being (highly) organized and boils down to institutional discipline.

There are many factors and variables that inform whether or not a business may even be viable for some type of strategic transaction:  e.g., (1) efficacy of the product / services in relation to the commercial opportunity looking forward; (2) financial health of the business – past, present, and future; (3) the somewhat amorphous yet important consideration of “fit”; and (4) fortuitous (!) timing.  A business that has been intentional, committed, and consistently disciplined to prepare for a strategic event as part of normal business operations will be better positioned to focus more on optimizing deal terms and extracting optimal value from the transaction rather than the minutiae of the exhaustive Due Diligence process. 

Again, the tenets of ongoing preparation are basic if not overly simplistic.  As such, there is a risk in minimizing these preparatory activities as extra administrative work rather than standard operating procedure.  Put your business in the best position to maximize its value by starting today to prepare for its next strategic event.

By David Ow