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Practitioner's Complete Guide to M&As: An All-Inclusive Reference, with Website by David T. Emott

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Topic 18

Unlock Hidden Value: The Lean Enterprise

Postclosing initiatives must include a thrust to reduce waste, improve throughput and productivity, reduce working capital employed, and increase cash flow. Lean enterprise thinking is the answer, if you know how to do it. Evaluate lean opportunities during due diligence, and you will enhance your ability to make your deal successful and will have an advantage in the negotiation process.

EVALUATE LEAN OPPORTUNITIES DURING DUE DILIGENCE

  • Virtually every business process has waste in it (perhaps 25% to 50%).
  • “Look under the rocks” of the target as you do your due diligence to find waste. Value the impact of eliminating it, and you will learn how far you can stretch your offer or improve your returns and you will be a step ahead in making your deal really work.
  • During due diligence, evaluate the most significant business processes of the target, which usually include sales and customer order processing, order fulfillment and material conversion, materials procurement and payables, returns, distribution, billing, receivables and cash collection, capital equipment procurement, and so on.
  • These business processes generally are identified by discussions and observations of the seller's principal activities and capabilities during the due diligence process (see Topics 1 and 10).
  • The order fulfillment and material conversion process in manufacturing (and other) companies is usually a key place to start evaluating lean opportunities.
  • The ...

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