Unlock Hidden M&A Synergies in Test Infrastructure

Unlock Hidden Synergies Blog

Paul McNamara

Why are There Hidden M&A Synergies in Test Operations?

Our customers often make the decision to focus on synergies in organizations heavily invested in test because of the capital intensity — both human and equipment —  in test organizations. The synergies come later than that have to though, as our algorithms could also help M&A synergies.  One reason test produces such a great opportunity for M&A synergy is that people hoard test infrastructure and ultimately own more of it than they need to. We write about hoarding in That One Bad Habit That Costs You Millions.

They hoard it because it is often a shared resource and they can’t be sure they’ll have it available to them when they need it if they don’t hoard it.  If it’s unavailable there will interruptions in key engineering and manufacturing processes get products to market or revenues recognized and converted to cash.  These threats incent teams to pile up Just-In-Case capacity and at the same time reduce investment available for new capabilities required for new missions or to improve operations.

How Do Teams Hoard Assets?

Test equipment is both sharable and a fixed resource.  As a result, it and all the expensive services that support it are hoarded for short-term, local benefit. While hoarding seems to work locally in the short term, it does eventually lead to higher than needed enterprise costs and delays that hit everyone, including the hoarders.

Teams hoard in any number of ways.

  • They take portable equipment and hide it in their lab, often called “Midnight Acquisition”
  • People schedule tests for longer than they’ll need hoarding capacity “Just In Case”
  • They make requests for test services “ASAP” so they get the capacity they need now rather than waiting for when they really need it.

Sente’s Approach

Our approach is data-driven, achieves results quickly, and then continues to mature those results over time continuing to accelerate engineering and manufacturing processes while eliminating unnecessary costs. It is a methodical approach that scales with no adverse effects on operations, actually increasing the speed of operations.

We are able to make quick judgments about locations where hoarding is likely to occur, redundancies, and obsolescence issues by using our software capabilities and the years of experience we have finding these opportunities.

SenteReference, our central repository of commercial test equipment capability data, houses parametric information on capabilities, market value, and obsolescence that, combined with our utilization algorithms, quickly enables us to find redundancies within buildings, across campuses, and across whole enterprises.

Our Results / Grounding for M&A Synergies

Our solutions help companies leverage their test infrastructure by finding opportunities for synergy across the organization and exploiting it.  We’ve produced 4X improvements to the utilization of assets in test organizations by significantly “right-sizing” inventories for the mission they support and then continuing to right-sized and align them with our software and practices.  We’ve produced synergies across rooms in one building, across an entire campus and across as many as 40 different global locations/campuses.

  • Reduced asset count by up to 50%
  • Increase equipment utilization by 200% to 400%
  • Reduce capital budget requirements 35% to 75%
  • Produce results in as few as 60 days

Applicability to Today’s Environment

With the consolidations currently underway, being able to create leverage in operations and engineering infrastructure is critical.  Newly joined companies have promised to produce “M&A synergies”.  They are looking to take cost out that is redundant, unnecessary, underutilized, obsolete, etc.

We’ve done this for years, but usually years after the integration when the test operations still aren’t well integrated.  We work with companies that are the accumulation of multiple different companies with their separate legacy cultures, ways of operating, and infrastructure to produce these synergies and to enable them to operate more efficiently so, in addition to taking cost out, they increase throughput.

The sooner our processes are installed the faster these synergies can be produced.  If possible, introducing Sente’s processes and tools in advance of integration with produce benefits prior to integration but will also accelerate the speed and value of synergies produced after integration.

How Does Sente Help M&A Synergies

We have years of experience helping companies quickly reduce the cost and improve the capabilities of their test operations.  When done as part of a reorganization looking for internal “M&A” synergies where aEAM is not already installed, we have tools and methodologies that will lower your cost of getting through this process.  If you need help we have experts that can guide you through the process perform some of the actions.  Our process includes assessing utilization and obsolescence and makes possible greater levels of cost and risk improvements than is typically possible. Our proven processes are well documents by customers and industry analysts alike, focusing on services including software-as-a-service.

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See how Scireo aEAM Software drops asset and support costs by 50% while accelerating time-to-market 2X.

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Notable Quotes

“Sente’s proprietary Test Resource Management™ solution delivers an integrated and holistic approach for test resource management with unique capabilities that allow large organizations in the aerospace and defense, semiconductors, and life sciences industries to manage and streamline the complexity of their test operations and to be more effective, competitive, and strategic.  Frost and Sullivan Analyst