CASE STUDY

Multi-firm Due Diligence to Integrated Company and Beyond

Background

 

Company 1 and Company 2 are leading providers of medical practice management software focusing on helping doctors utilize technology more effectively to enhance their overall practice outcomes and patient success. Each company operated as a stand-alone entity but were integrated post-acquisition to provide a best-of-breed solution to customers by leveraging the best in each company.

Challenges & Opportunities

 

businessman searching virus in a laptopPrivate equity investment. Investments are inherently risky. Private equity (PE) firms tolerate a certain amount of risk, but work to identify, reduce and have a mitigation plan in place even before the investment closes. A key goal is to identify those risks, as well as the strengths of the organization and the opportunities for value creation post-acquisition. Most PE analysts do not have a technical background, so they need help in identifying potential issues with the product architecture, development processes, R&D costs, and people. In this case, two similar companies in the same space were evaluated to compare and contrast capabilities and build an aggregated plan for the future.

 Different companies. One vision. Each company had a solid product that accomplished many of the same business goals. Each had learning from years of experience in the industry. However, the two teams had different development models and tool sets that needed to be consolidated for consistency, on-boarding, and cost savings.

 Unclear technical product direction. The products were similar in functionality but different in technical make-up—one on-premise and one cloud-based. A key challenge was to create a vision for technical product direction in a short amount of time.

 

Solution

 

As a trusted advisor in the private equity space, firms leverage Crosslake’s proven expertise and structured technical due diligence process to determine where the largest investment risks are from a technical perspective.

Crosslake provided value in multiple ways:

  • An initial set of conversations with the target companies to set context and identify areas of focus for further due diligence.
  • An on-site visit to each company, building rapport with the team, interviewing leaders, and delving down into development details. We analyzed the architecture of both products providing an account of strengths and weaknesses. We investigated the source code in strategic areas to determine risk. We looked at team documentation, reports, and metrics to find red flags and improvement areas.
  •  A detailed report outlining the investment risks and value creation opportunities was created. We met with the PE firm to discuss the findings related to their investment objectives in detail. Embedded in these discussions were our recommendations on how to structure the newly consolidated organization, with a strategy on the identified human resource gaps.
  • Brainstorming and planning for an overall company integration strategy, outlining what needed to be done from the engineering perspective based on our years of experience.
  • A detailed analysis and post-acquisition report for each company. The report identified issues and root causes that lead to an improvement plan to be executed over the next year.
  • A plan for tools consolidation and transforming the team to an Agile development model using Scrum and Kanban methodologies, complete with coaching and training was developed and delivered.

 

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Results

 

Technical due diligence. Crosslake identified risks and value creation opportunities for each company with an initial plan for integrating the two entities together.

Engineering optimization. After assessing the team’s detailed capabilities, we created an improvement plan for the integrated company. We also concluded that the team would benefit by moving towards Agile development.

 Integration/consolidation plan. A plan to integrate the engineering teams was created to push execution within one quarter of calendar time.

 Value creation. To help the integrated team move towards Scrum, Crosslake trained the team and provided hands-on coaching on techniques from project management to development to QA. We also upgraded their database systems and redesigned a portion of their database.

 

Conclusion

 

tasksCrosslake drove two technical due diligence efforts to ensure investment objectives of integrating both companies could be met. Not only did we identify risks and opportunities, but also did a detailed investigation post-acquisition to identify the highest priority improvement opportunities. Crosslake influenced and helped implement those improvements to the consolidated organization for greater development efficiencies and a more robust product and plan.