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FM Analysis
Management Due Diligence
Contact: Annie Gray Tel: 020 8332 6937
Email: annie@highwireconsulting.co.uk sandra@highwireconsulting.co.uk
Annie Gray Website: www.highwireconsulting.co.uk
Highwire Consulting was founded in 2005 by Annie Gray and Sandra Aldridge, two business psychologists who had previously worked together at the Management Due Diligence practice of Burlington Consultants before they were acquired by Deloitte. Highwire provides Management Due Diligence (MDD) services to UK mid-market Private Equity firms, and management and organisational development services to their portfolio companies.
Highwire Consulting provides strategic business support for companies. Can you discuss how you would do this?
Highwire provides information about the talents and risks that a management team bring to a potential investment, and thereby enable investors to make informed decisions about the impact that the management team will have on the business they are buying. At the very start of an MDD project, we work with the PE firm to understand the nature of the business they are interested in, and their value- enhancing strategy to exit. This gives us the information we need to identify the business-critical skills and profile which will be necessary for success in the management team. Our individual and team assessments are then set against these criteria. We think assessing executives against the needs of the business, not against other executives gives more value to the investor as every business faces unique challenges. Once the investment has been made, we often continue to work with the portfolio company to enable them to seize their potential and minimise the risks that we have identified, by helping them to resolve interpersonal tensions in the team, for example, or to help the business as a whole to adjust to the very different demands that a PE-backed business might make.
Management Due Diligence evaluates the executives who make up the senior management team(s) prior to the close of a business deal. What questions should the management due diligence process answer?
• Can this management team deliver a new business strategy? because typically, the investor wants to make a difference through growth – possibly by entering new markets or through a buy-and-build strategy, which may be new territory for the existing management team.
• In what way could an individual manager or the team as a whole threaten the success of this business? A CEO with a reckless attitude to risk, for example, or
a super-cautious FD, could compromise the business in different ways
• The team are performing well now, but can they handle a business two or three times this size? And if not, what contingencies should we put in place?
• What is missing? Are there skill gaps in this team? Are there roles/responsibilities which are not represented? How clear are the roles and responsibilities in the senior team?
• How will this team cope with a downturn? Do they anticipate and put contingencies in place? Will they carry on as always in the hope that the market will recover soon?
• How tough are they on performance? Will they drive the business to achieve and succeed?
If you are able to do so, please detail any significant clients/cases undertaken by your firm in the past year.
• SGX Sensortech, an Instrumentation Solutions business, acquired by Baird Capital Partners (Europe)
• Horizon Care, a Specialist Child Care business, acquired by NBGI
• Clearswift, a Security Software Products company, acquired by Lyceum
• Molinare, a Film & Broadcast post-production facilities company, acquired by Next Wave
• ATR Group, Aberdeen-based oil and gas rental services business, acquired by NBGI
• Access, a provider of business application software and services to UK headquartered mid-market companies, acquired by Lyceum
What are the common challenges faced by your clients?
Our clients recognise that the success of any business is dependent on the people who lead it, and therefore want to assure themselves that not only are they mak-
ing a sound investment in the business assets, but also in the management assets. They have often developed a sense of the capabilities and the weaknesses of the management team, but there are several challenges they face in making people-related investment decisions, and this is where we can help. These challenges are –
• Identifying potential, and understanding where management will be strong in the future, and where their vulnerabilities lie
• Understanding the implications of a particular personality type – if a CEO is particularly narcissistic, for example, how might this impact the business?
• Understanding how to get the best out of the team
• Discovering if a buy-in CEO can work with the incumbent team
How can your firm assist the client when such challenges arise?
Our MDD process is designed to assist our client with the questions they have about the Board, new and existing Executive Directors and other managers. We achieve this by taking a thorough brief at the beginning, understanding the profile of each Executive and the team as a whole by using a variety of methods, including interviews, personality questionnaires, cognitive processing tests, interviews and references. We make sure that not only do our clients get the objective, independent advice they need, but the management team get feedback too, and recommendations which they can build into their 100 day plan. For example, we recently advised a client on a deal where 2 of the management team were buy-in candidates, joining a business where the owner was exiting and 2 of the original team were rolling-over. We were able to advise what the team needed to do to be as effective as possible as quickly as possible, and this was incorporated into the 100 day plan.