Value-Leakage

While many companies may view the sale of a business as an important strategy for increasing capital or refocusing the organization, very few have mastered the complex procedure of executing a divestiture. An abundance of private equity capital and a robust debt market may have created an ideal environment for sellers, but nearly half of all companies still believe that they're selling businesses or product lines for below their true worth.

Findings indicated that the key factors behind not achieving the full potential of their sales were related to post closing issues, a lack of control over the sale-process time frame and purchase-price and closing-balance sheet disputes. While maximizing the return from a sale is the leading measure of success or failure, there are many other factors to examine when determining how to improve the sale process. Because value leakage continues to be a significant issue for sellers, even after a deal is closed, it's vital to address the largest potential exposures before contacting buyers.

The Value Leakage Model is an assessment tool for finding the opportunities within a company and thus improving the business processes. This Value Leakage tool balances the ‘hard’ measurements in financial values in terms of market difficulty and the ‘soft measurement of competence management, process maturity and corporate coherence characteristics. The Value leakage tool enables prioritization of the action plan for continuous improvement of business processes, using Procurement as point of reference. With this tool each company can develop a set of clear transparent objectives to work on from the business perspective and from the human, competence management and maturity management perspective. The latter will leverage its results by increasing the opportunities for improvement, cost savings and new revenues.

The value leakage model has proven to be a perfect instrument to better promote, control and develop the procurement function. After the necessary changes the model helps to explain the added value of procurement.

(Image source: Emeritor.com)