We frequently discuss the success, or failure, rate of transactions, but I’m interested to hear from others what if any tools you have used to measure success as well as how often this actually takes place.
Hi Jeremiah – one way we are talking about measuring the success of an integration that includes a transition service agreement (TSA) is to measure a key performance indicator (KPI) of the ability to exit the TSA by the agreed upon date and the financial impacts associated with doing so. This dollarizes a value related to the integration. Additionally, we are planning to use a synergy tracker to identify potential technology, vendor, or headcount synergies and the dollar value associated as they are realized throughout integration.
We have used in the past a financial and non financial kpi. For example a 5 year financial plan and social and environmental metrics. The KPI were given to the new management and reviewed on quarterly basis depending on the nature
I echo Emily on the financials. From a Private Equity standpoint, the way to measure success is simply the difference between the price they sell the company at exit and the cash they used to purchase the business at the beginning.
For a strategic buyer without a plan to exit, I think relevant metrics should be measured every quarter for 3-5 years and tied to managers’ variables. I believe there should be no more than 5 really critical KPIs.