Finding a "diamond in the rough" is the dream of any good M&A strategy and spotting where you can apply lean is a great place to start.
I've visited a lot of biotech companies and been taken on the "Disney Tour" of their facilities. I've even given a few myself and they can be the most enlightening in regards to operational efficiency.
What is always readily identifiable is the presence or lack of lean methods being utilized. This is a huge advantage when estimating the upside of a deal.
Part of any M&A deal is estimating the future growth potential of the company being acquired.
Most businesspeople focus on financial statements and sales forecasts coupled with marketing and industry data to scope a future deal.
All of these are needed to assess the possibility of an M&A but if these are taken into context with the current operational flow of the company, you now have an excellent forecasting model.
It's essentially a gemba walk for assessing the current state and/or future possibility of a lean implementation.
When you look at the numbers in context with their operations management you will see the future.
Here are some scenarios to ponder:
If all the financials look good and the company is not lean then the upside potential is very good. Using lean methods would lead to and even more profitable company by reducing waste and increasing customer satisfaction.
If all the financials are just ok and the company is not using lean then the upside could still be very good. Not only would you get the company at a reduced price but also have a huge upside from a lean implementation.
If the financials are just ok and the company is already using lean to keep costs low then the company might not have as much upside. There could be a fundamental flaw in their business model where they missed the VOC or need additional lean implementation.
If the financials are terrible then the company is either using lean improperly or not at all. You then have little upside unless your looking to acquire some type of proprietary technology or the sum of the parts is worth more than the whole of the company. The only time this is a good value is if the poor financials are due ONLY to operational costs.
The presence or absence of lean in an organization can be a great indicator as to the future viability of any investment So the next time you're going on the "Disney Tour" it might be worthwhile to bring a lean expert along for some additional guidance.
