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News from PDSS Inc.
"Leading the Future in Product Development" 
June 2013- Vol 6, Issue 6
In This Issue
The Role of CPD&M in M&A
Download Free CPD&M Quick Guide
Greetings!
Skip has some tips on how Critical Parameter Development & Management (CPD&M) can help during due diligence and post-merger or acquisition of the M&A process. PLUS-download your free CPD&M Quick Guide!
-Carol
The Role of CPD&M in M&A

There is yet another valuable use for the discipline of Critical Parameter Development & Management (CPD&M) and that is as a tool to evaluate and eventually integrate a technology or product during a merger or acquisition (M&A). This month I will address behaviors that enable a healthy integration of two organizations during M&A where the assets are technologies and/or products. In a future newsletter, I will discuss the topic as it relates to partnership arrangements.

 

Merger vs. Acquisition: Some Differences

 

In general, a merger requires open and collegial negotiation between two equals who are blending their strengths. The value is often stated as 1+1 = 3. This is not unlike a physics or chemistry-based interaction between two or more engineering control parameters. When they are used to co-contribute to a function within a design - their independent AND interactive effects actually create a 3 term model Y = A + B + AxB . A merger tends to consume and deploy the combined resources of the merged organizations. Usually, there are few job losses. The combined companies need all the technical development talent and use all the development resources to extend and broaden the technology and product portfolio. Mergers are often two substantial organizations coming together to produce a fairly large enterprise that sees value in the "bigness" of the merged entities. It's possible to get massive market and segment coverage rapidly vs. trying to obtain it through organic and competitive growth.

 

An acquisition focuses on buying a company to obtain its intellectual property, a new technology or a product. Acquisitions often trigger job losses or layoffs if the buyer is primarily interested the knowledge and physical resources but not necessarily all of the human capital. Many acquisitions do retain key human talent and can actually have a negative experience when desirable employees will not relocate if required by the logistics of the purchase.

 

Either way, when these integrations occur, a due diligence process is followed to identify risk and to quantify the value of the opportunity. If the decision to merge or acquire is made, then the hard work of integration begins. So, during the M&A process, there are pre-decision data gathering issues and post-decision integration actions. The latter benefit from much clearer information since the reluctance to fully share everything has been removed.

 

CPD&M During Due Diligence

 

Critical Parameter Development & Management (CPD&M) can help manage technical risk during a merger or acquisition. Most companies undergoing growth by M&A follow a process, which probably includes a checklist to help prevent mistakes during the process. During mergers, the checklists apply equally to each company in the transaction, while for acquisitions, the checklists apply only one-way. These checklists may be anemic because it is assumed that only limited information will be provided. In this case, the checklist may be limited to information that will be forthcoming based upon previous experience or advice from those who have been through the process before. I recommend developing a very detailed checklist that includes probing questions that almost surely will go unanswered, which is good information by itself! For one thing, it tells you that you are likely going to have to conduct additional development work on certain key areas of the technology or product of interest. The unanswered questions are a leading indicator and task timing generator for likely future work you will need to invest. The detailed checklist will reveal these gaps and there's a good chance you'll have to spend money and time closing them.

 

The CPD&M Process workflow and The Big 7 Metrics can be used to probe just how a technology or a product was developed. Even if proprietary performance data is not disclosed during due diligence (there are good reasons why it won't be disclosed!), you can still ask to see HOW they developed what they are offering. You can tell a lot by digging into the tasks, workflow design, timing and the tools, methods and best practices used to develop the technology or product of interest. A project schedule will tell you what tasks were performed, how long they took and what tools were used to underwrite the integrity of the technology or product they claim has value. If their "development process closet" is bare, then you know they probably used ad-hoc tasks to do build-test-fix iterations that will most likely leave the technology or product in a state of moderate to gross immaturity. They may have excellent engineering degrees and experience - but some of the worst development disasters I have seen come from fully credentialed engineers!

 

CPD&M After the Merger or Acquisition

 

After closing on the deal, be sure to modify your technology and product development process to create a "finishing strategy" that transitions what you have bought or merged into a risk-balanced, rational, realistic, "right-sized" project schedule. Doing so defines a credible path to revenue and margins that lie behind the reason for the merger or acquisition.

 

The basis for the modified technology and/or product development process and project schedule is the information NOT checked and validated on the rigorous due diligence checklist. Build upon these unknowns once you have done the deal and the kimono has been opened. If your merger or acquisition partner is known to NOT be practicing CPD&M, there will be gaps for all the parametric relationships in their designs that remain unknown and at-risk. What are the new, unique or difficult (NUD) functions? Is there evidence that they were tamed into easy, common or old (ECO) functions and something very much like The Big 7 Metrics were measured to prove the functions and their governing parameters are well-behaved under both nominal and stressful conditions?

 

Shine the powerful light of CPD&M on any technology, product, production system or supply chain to illuminate the true risk and actual problems embedded in what you have bought or organically developed. Caveat Emptor! 

DownloadDownload Your Free Copy of CPD&M Quick Guide

CPD&M Quick Guide Cover Image

 

Click here to download your free copy of PDSS' Critical Parameter Development & Management Quick Guide. An explanation of the "Big 7" is on page 6 and 7 of this 10-page Guide. 

 

This Guide is a condensed summary of the CPD&M methodology and tools.

Is there a topic you'd like us to write about? Have a question? We appreciate your feedback and suggestions! Simply "reply-to" this email. Thank you!
 
Sincerely,
Carol Biesemeyer
Business Manager and Newsletter Editor

Product Development Systems & Solutions Inc.

 

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About PDSS Inc.
Product Development Systems & Solutions (PDSS) Inc.  is a professional services firm dedicated to assisting companies that design and manufacture complex products.  We help our clients accelerate their organic growth and achieve sustainable competitive advantage through functional excellence in product development and product line management.
  
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