aerial view of winding road and dense forest
aerial view of winding road and dense forest

As M&As Heat Up, PE Firms Can Enhance Transactional Value in Five Key Areas

David Haufler, Managing Director Global M&A Practice Leader
Ryan Reents, Associate Director Transaction Services

Vaccine distribution is ramping up, economies are beginning to recover, and the world is gradually turning the page on the tumultuous past year. For the private equity (PE) sector, which saw deal-making bounce back towards the latter half of 2020, this can only mean one thing: growth.

From change in government administration to the rapidly booming business of special purpose acquisition companies (SPACs) to the surge in technology and healthcare transactions, the current landscape presents a bevy of opportunities for PE firms, and given the high levels of “dry powder” many are currently holding, there is a sense of urgency to deploy and utilize this capital in the marketplace.

As M&A activity heats up, PE firms must continue to treat transactions as a journey, not an event; there is so much to plan beyond the standard financial diligence and synergy capture. Here are five key areas where PE firms can incorporate best practices to capture and enhance transactional value.

  • Human Resources
  • Company Culture
  • Customer Experience
  • Information Technology
  • Lookback Assessments

Human Resources

When a deal is announced, one of the most common questions employees ask is, “How does this transaction affect me?” Given the natural anxiety among employees, it’s important for firms to have a plan for managing talent. Whatever the deal objectives may be, PE firms must consider the people that they have or need to have to deliver the results, while obtaining buy-in from key stakeholders. Having a solid human resource plan will allow the PE firm to quickly gain key stakeholder buy-in and thereby focus on the mechanics of the deal. Furthermore, solving and answering important HR questions regarding benefits, retirement plans and time off can help to put employees’ minds at ease and get them excited.

Company Culture

When it comes to assessing a potential target, a best practice is to consider the different cultures of the acquirer and the target, and how that might affect performance. However, culture continues to be one of the most overlooked causes of transaction failure. When cultures collide, they can create conflict for all parties involved in a transaction. From the leadership team of the target company down to entry-level staff, culture must be identified, defined and planned for to ensure true alignment. Equally important is the ability to execute this plan. To ensure cultural alignment, a dedicated team responsible for driving and owning the cultural integration process must be established to navigate the journey of two companies becoming one.

Customer Experience

The customer experience is a significant value driver for most PE firms. Historically, this experience has taken a back seat in integrations, with more attention given to other high-impact areas. In the current landscape, PE firms cannot afford to exchange the customer experience for other priorities. Firms must consider the impacts of customers beyond the typical financial measures and seek to understand how a prospective target interacts with its customers and intends to grow its customer base. By understanding this dynamic, firms can make better and more informed decisions regarding deal rationale, KPIs and synergies.

Information Technology

While workstreams like finance and HR are more contained, IT touches every single part of the enterprise and enables business units to succeed every day. As such, IT assessment and integration is another key focus area as it sets the stage for the type of value that can be created with the new organization. Additionally, with current remote working arrangements, companies are working within a heightened cybersecurity risk environment, and that means that firms must prioritize IT risk mitigation when undergoing a transaction. Incorporating IT into the target due diligence process can help PE firms unlock any hidden value and allows for a bird’s eye view of the overall infrastructure.

Lookback Assessments

No deal is perfect and free from error. The ability to look back and assess what went wrong with any transaction is what separates the good from the great. After a deal closes and integration is complete, it is tempting for firms to wipe their hands clean and simply move on to the next target. These companies are missing out on the powerful insights that come with conducting a lookback. Learning from prior mistakes can help the firm adapt and overcome future obstacles, while also ensuring that successful processes are repeated in the next transaction.


Proper preparation and execution behind the scenes is what really drives successful deals. By considering and looking for synergies in the aforementioned areas, in addition to the more traditional deal concerns, firms can feel confident in their approach and prepared to handle transactions of any size and complexity.

Rob Gould, Managing Director and Global Leader of Protiviti’s Private Equity practice, contributed to this content.

Add comment