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Case Study 03

M&A Business Efficiency

  • The Client
    • Industry: Construction and property services
    • Location: London and surrounding area
    • Employees: 150

The Background
A respected property services business is born from the merger of two former businesses, together with a revised growth strategy that allows it to leverage the growing commercial and public sectors. Oomri helped them eliminate financial and operational waste and create more efficient and agile operational structures and processes, whilst improving the transparency and effectiveness of performance and reward mechanisms.

The Challenge
Two respected property services firms owned by the same shareholders had been operating for the past 10 years in distinct but related markets. Over that time they had grown individually by taking opportunities that presented themselves, with the result that there was significant duplication across the businesses.

With the changing UK economy the businesses had started to see softening demand in some sectors (year on year enquiries down 52% in one sector alone), with increasing demand in others. The businesses wanted to continue their strong growth by leveraging the new opportunities presented to them, however the complex legal and operational structures and poor visibility of performance (both financial and human capital) meant that it was difficult to identify exactly which parts of the business were truly profitable.

The Solution
In order to ensure the most efficient use of the company’s resources we recommended that the financial performance and strategic agility of each company be assessed in its current state, in order to eliminate waste prior to any legal or operational mergers. This analysis uncovered that the companies were investing on average 31% of their revenues into working capital, when the industry average was in the region of 15-20%. The review further uncovered a series of structural and organisation challenges contributing to additional unnecessary resource use.

By understanding the current source of competitive advantage, a revised growth strategy was devised. To support this growth strategy and rectify issues found the following were addressed:

  • Combined legal entity created from the merger of the two companies
  • Creation of a new organisational structure, target operating model and roles
  • Implementation of a transparent performance and reward system to support the business objectives
  • Specification and implementation of a business intelligence system to manage profitability at the individual project level and provide inputs into the performance management process
  • Improvement of financial controls to reduce working capital requirements
  • Outsource non-core functions

The Results
Implementation of the range of initiatives spanning the financial, organisational and human capital spheres helped the new organisation immediately lower working capital, releasing cash for additional expansion. Both sales and profitability increased, assisted by the clear visibility of profitability at both the customer and project level. As a result of the engagement, Oomri consultants were engaged on a monthly basis to help guide the strategic direction of the business and ensure the company continued to remain adaptable to its strategic context.