Why Private Equity needs good change management support?

Undoubtedly strategic change management has a major role in corporate transactions and restructurings. Many deals are either unsuccessful or do not deliver the full value expected when people and organisational change impacts are ignored or poorly planned for. This directly results in loss of revenue and delays in realising the value of the deal or restructuring initiative.

There is a big focus on ‘cultural fit’ and all things related and nowadays Private Equity firms are investing considerable time and resources to better understand a target company’s organisational dynamics before concluding any deal. This could be a major factor in realising value from the deal down the line. An organisation’s culture could either make it or break it over the long term. Thus it becomes vital for senior leadership to define the culture required for success, or in the case of M&A’s, creating a vision for the future that will aim to bring the best of both organisational cultures together to deliver maximum value for all stakeholders.
Collective behavioural patterns determine how work gets done in an organisation and that in turn relates directly to performance, motivation and the ability to cope with internal and external change. Ignoring these important factors is a major strategic risk for PE firms and can ultimately affect the realisation of value from any deal. Ignoring or poorly managing organisational change can easily result in:

  • Poor employee engagement, motivation and ultimately performance;
  • Serious resistance to change and low levels of morale across the organisation;
  • Ambiguity around the organisation’s value system and beliefs, which lead to disillusionment amongst stakeholders;
  • ‘Jumping ship’ and loss of key talent and senior leadership;
  • Poor business transformation and change planning resulting in the slow execution of the transaction or restructuring initiative.

Vital to countering these strategic risks is the effective visioning, planning and execution of business change. The process requires effective management of corporate messaging, people and cultural / behavioural change. It is most critical for the workforce to be aligned to the strategic objectives of the organisation and customer needs. Organisations that focus time and resources on doing this effectively have ultimately had higher levels of transaction success in the past.

In conclusion, the key areas that require the most attention during the transaction lifecycle (from a business change perspective), are:

  • Identifying the behaviour sets that will lead to a successful integration or restructuring exercise;
  • Determining the strategic drivers that will help to reinforce these behaviours in the future and implementing them successfully during the transition phase;
  • Understanding the organisational cultural differences and similarities and working with key parties to ensure these factors do not hinder the transaction process. Understanding this clearly will enable the creation of a shared / common vision for success;
  • Ensuring the change management strategy is being tracked and resulting issues being dealt with promptly via a well-defined change agent network.

Having structured change management plans in place will provide the levels of confidence in dealing with organisational change successfully and lead to a more successful transaction for investors in the medium to long term. It will provide the basis for realising deal value more quickly!

Vellendra Sannasy is an Organisational Change Professional with extensive experience in leading strategic and operational business change. Vellendra has worked with global organisations in the UK, US, Asia and South Africa, with a great appreciation for cultural diversity and different ways of working. He is also the Founder of StratChange Consulting, which is a niche consultancy, providing strategic and operational guidance to C Suite Executives and Senior Management teams undergoing complex organisational change.

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