Key Takeaways
- • Simon Wells, Co-founder and MD of Evology, argues that post-private-equity-deal M&A programs and transformation or cost-reduction programs must be aligned under one shared baseline, roadmap, and governance structure to protect the investment case.
- • Conflicts arise when carve-out or integration work and turnaround programs draw on the same people, systems, suppliers, and budgets while teams work toward different goals and assumptions.
- • The M&A transaction should set the critical path, since transitional service agreement (TSA) deadlines carry financial penalties if a business fails to exit seller support infrastructure on time.
- • A joint steering committee, one dependency tracker, and one risk register are recommended to surface trade-offs such as EBITDA timing and 13-week cash flow impacts before decisions are made.
- • Early engagement is presented as the most important ingredient, as problems typically arise when each program sets its own targets before teams coordinate.
Summary
In a column for Forbes Business Council, Simon Wells, Co-founder and Managing Director of Evology, examines how businesses undergoing private equity investment can reconcile two concurrent change programs in the period after an acquisition. In a carve-out, a new standalone business may need to be built quickly, while in an integration, two organizations, systems and operating models must be combined. Simultaneously, a turnaround, cost reduction or transformation program may be underway to deliver the investment case, adding pressure to grow or return to profitability quickly.
Wells argues that the two programs often compete for the same people, systems, suppliers and budgets, with teams working toward different goals and making decisions on different assumptions. He recommends first agreeing a common baseline for technology, headcount, operating costs and the operating model. Cost reduction teams may identify savings based on the current cost base, while M&A teams running request for proposal processes may find that systems and services cost more once the business operates independently. Similarly, cutting headcount may conflict with staff essential to completing the transaction.
On sequencing, Wells cautions that removing key employees too early can leave a business without the capacity or knowledge to complete a carve-out, and that moving systems ahead of schedule can create operational risk or affect Transitional Service Agreement obligations. He notes that CFOs, IT directors and HR leaders are often required by both programs at once. He proposes a single overarching roadmap in which the M&A transaction provides the critical path, with the transformation program overlaying it to test whether changes or savings can be accelerated, with trade-offs decided consciously.
Wells advocates a governance model built around a joint steering committee including M&A and transformation sponsors, the CEO, CFO, the private equity investor and, where relevant, the seller, supported by one dependency tracker and one risk register. He stresses that early engagement is critical, since problems often emerge when each program has already set its own targets, requiring decisions to be unwound. He concludes that the priority during a transaction should be building an organization able to stand independently, with cost reduction continuing in subsequent years.
Wells argues that the two programs often compete for the same people, systems, suppliers and budgets, with teams working toward different goals and making decisions on different assumptions. He recommends first agreeing a common baseline for technology, headcount, operating costs and the operating model. Cost reduction teams may identify savings based on the current cost base, while M&A teams running request for proposal processes may find that systems and services cost more once the business operates independently. Similarly, cutting headcount may conflict with staff essential to completing the transaction.
On sequencing, Wells cautions that removing key employees too early can leave a business without the capacity or knowledge to complete a carve-out, and that moving systems ahead of schedule can create operational risk or affect Transitional Service Agreement obligations. He notes that CFOs, IT directors and HR leaders are often required by both programs at once. He proposes a single overarching roadmap in which the M&A transaction provides the critical path, with the transformation program overlaying it to test whether changes or savings can be accelerated, with trade-offs decided consciously.
Wells advocates a governance model built around a joint steering committee including M&A and transformation sponsors, the CEO, CFO, the private equity investor and, where relevant, the seller, supported by one dependency tracker and one risk register. He stresses that early engagement is critical, since problems often emerge when each program has already set its own targets, requiring decisions to be unwound. He concludes that the priority during a transaction should be building an organization able to stand independently, with cost reduction continuing in subsequent years.
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