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Dealmaking is a fast and effective way to bring in the talent and technology your business needs to drive transformation. However, the demands of the deal itself and preparations for it often creates additional pressure and, too often, force a compromise on value creation to get the deal over the line. Even after an acquisition, gaps may remain. Managed services are increasingly an effective, and trusted, part of the solution to this, by helping to fulfil these needs and incorporating the deep expertise, resources and problem-solving skills of professional services to identify, create and deliver value throughout a transaction.
Deal dynamics naturally vary between corporates and private equity firms. As a corporate, moving further and faster on transformation can help you to fire up innovation and forge new business models. As a private equity firm, the push for transformation in your portfolio companies is given further urgency by the need to speed up turnaround and boost multiples ahead of exit, coupled with the importance of keeping your own fund operations as lean as possible.
Operations under strain
But as many of you are all too aware, the same strains on talent and technology that are driving dealmaking can also undermine its delivery and effectiveness. Poorly executed acquisitions or business restructurings can trigger an exodus of people in areas where talent is already in short supply. This puts even more pressure on those left to keep the lights on and support the deal.
“Borrowing” to boost your capabilities
How can you bridge these capability gaps? Building can be too slow, especially when the timelines for sale and exit are pressing. Buying can bring in key talent and tech at pace, but won’t solve everything. Which brings you to borrow. Some might have tried this before and then abandoned the idea. But it might be worth taking a second look.
Transform to run
More and more businesses are now turning to managed services, not just to bridge capability gaps but also to accelerate transformation and boost growth with greater certainty. The focus isn’t only on routine tax, finance and other functional requirements, but also on more complex demands in areas such as project management and regulatory implementation. The big shift is that the expertise and problem-solving skills of professional services are now being regularly incorporated into the managed service model.
This kind of robust support can be especially useful during the short-term upheaval of M&A, restructuring or systems installation. It allows you to release staff and sustain business-as-usual, while minimising fixed costs and any transitional service agreement requirements. For private equity, there is the further advantage of being able to bring in capabilities to deliver a targeted tactical uplift in EBITDA and then stand these down as soon as the exit is completed.
Building in managed services
In our experience, a managed service solution works best when it’s approached with a value creation mindset. Keeping a clear steer on your objectives and building managed services into your strategy can help you augment capabilities, manage risk and reduce the number of lost opportunities due to poorly performing operations. For us, three key considerations stand out:
- Pick your spot
Choose which functions (and areas within them) would most benefit from managed services. Don't just limit yourself to the operations that are suffering from a talent or tech gap. The flexible nature of managed services means it's also worth considering targeted support in more complex areas such as distribution management or due diligence. - Accelerate your ambitions
The adaptability of managed services means that you can strategically deploy it with confidence where it can best accelerate your ambitions. That might be a stop-gap or you may also find that not having to manage certain functions and continually update technology offer a compelling business case for moving them towards a longer term managed service approach. - Manage security and logistics
As managed service providers look to support more complex and bespoke processes it is critical that you set out an effective governance framework and pick a partner you can trust that brings the right balance of human-led, tech-powered capabilities. Having a global reach is helpful when mapping out where key data sits. Furthermore, considering how the provider can easily plug in or unplug capacity can further help build confidence and enable you to better manage your reputational risks.
If you would like to discuss any of the issues raised in this article or find out more about the opportunity managed services can provide to accelerate transformation in your business, please get in touch.
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