Management audit as part of the acquisition of a majority holding by an investment fund in a service company

Assignment

Management audit as part of the acquisition of a majority holding by an investment fund in a service company 

Issues : Supporting growth
Services : Leadership Consulting

Context

This service company posted revenues of several tens of millions of euros and an EBIT of 15%.

An investment fund was planning to acquire a majority holding in the company through an LBO. The seller found his successor outside the company, in their main equipment supplier. In house, a COO with a strong personality was running the company.

The pairing of an external CEO, mainly focused on marketing and sales, and a COO from inside the company, seemed ideal.

But there was a risk of conflict between these two men, who had never worked together, which threatened the company’s performance and profitability.

Eurosearch & Associés involvement

The majority investor asked Eurosearch & Associés to undertake a management review, which they presented as an integral part of their standard due diligence audits. Our non-involvement in the negotiation process was a sign of neutrality.
Eurosearch & Associés carried out a management review of the complementarity of the two directors’ competencies, their leadership compatibility, and their desire to cooperate.

Following this review, we reported back:

  • We gave feedback to directors on their personality at work and personal aspects they needed to work on to ensure the success of this operation together
  • We gave the investor an overview in the form of a confidential written report

Results

The review led to:

  • Recommendations on the scope of the responsibilities of both Directors
  • Support from an independent director for the CEO while taking up his new duties
  • The more direct involvement of the COO in drawing up the business plan, particularly in identifying targets for external growth
  • Better cooperation between the two Directors, which was essential to the success of the LBO

Calling on the assistance of an outside party meant the review was better accepted, and helped speed up the process.