Management audit and majority shareholding

Assignment

Management audit as part of the acquisition of a majority holding by an investment fund in a service company

Challenge: Supporting growth
Service: Leadership consulting 

Enjeu(x) : Supporting growth
Service(s) : Leadership Consulting

Context

This service company had revenues of several tens of millions of euros and EBIT of 15%.

An investment fund was planning to acquire a majority shareholding in the company through an LBO. The seller found his successor from outside the company, with his main equipment supplier. Internally, a COO with a strong personality was running the company.

The pairing of an external CEO, mainly focused on marketing and sales, and a COO from inside the company, seemed ideal.

But there was a risk of conflict between these two men, who had never worked together, and this threatened the company’s performance and profitability.

Eurosearch & Associés involvement

The majority investor asked Eurosearch & Associés to undertake a management audit, which he presented as an integral part of his standard due diligence audits. The agency’s non-involvement in the negotiation process was a sign of neutrality.

Eurosearch & Associés undertook a management audit of the match between the two officers’ competencies, their compatibility as leaders, and their willingness to cooperate.

Following this review, we reported back as follows:

  • We gave feedback to the two officers about their personality at work and personal aspects they needed to work on to ensure the success of this operation together
  • We gave the investor an overview in the form of a written report, for his eyes only

Results

The review led to:

  • Recommendations on the scope of the responsibilities of both Directors
  • Support from an independent Director for the CEO as he took on his new duties
  • The more direct involvement of the COO in the definition of the business plan, particularly the choice of targets for external growth
  • Better cooperation between the two officers, which was essential to the success of the LBO

The use of an outside party meant the review was better accepted, and helped speed up the process.