The Value Creation Plan

The value creation plan has two outputs: the document, and the consensus it builds. Neither delivers without the other.

The deal is done. The investment thesis has been validated, the commercial due diligence has stress-tested the assumptions, and the integration plan has prepared the business for new ownership. What comes next is the work that makes or breaks the return.

A value creation plan is a sequenced set of commitments with named owners, measurable milestones, and consequences for missing them. Done well, it is also a managed consensus. The document and the consensus are both outputs of the same process. Neglect the second and the first risks being filed and forgotten.

Before the plan can be built, there is a necessary prior step: a rapid diagnostic to get everyone to a consistent starting point. A diligence process will have left a trail of assumptions about the market, the business, and the people running it. The rapid diagnostic stress-tests them against current reality, asking which still hold and which received wisdom has passed its best-before date.

The Rapid Diagnostic

A rapid diagnostic is not a repeat of diligence. It adds precision, identifying what has changed since the deal was agreed, surfacing any assumptions that were baked in without being examined, highlighting the inter-relationships between business drivers and ensuring every member of the management team is looking at the same picture before anyone starts arguing about priorities.

At a children’s TV company, the diagnostic had a specific job to do. The deal had taken the better part of nine months from original proposal to completion. The selling management team had promoted their own value creation plan and were exiting on the back of the sale. A new management team had been recruited, some with domain expertise and others with functional expertise, all of them new to the specific business.

The plan they inherited was looking dated before they arrived. The transition from VHS to DVD was at an inflection point, reshaping how content was packaged, licensed, and sold. Online distribution was just starting, without enough broadband penetration to make rollout feel imminent. Meanwhile, computer-generated animation was becoming competitive with stop-motion and live action formats, even for smaller producers, and online retail was disrupting the toy industry, still the main monetisation path for children’s IP.

A rapid diagnostic brought the new management team together and pooled the expertise each brought from their prior lives. Could Walmart maintain shelf space for the video category, and increase range, given that DVDs were much smaller than VHS tapes? Were DVDs’ higher price points sustainable? Could the company drive licensing growth with expanded style guides and new categories? Could it establish captive TV distribution, sidestepping Nickelodeon’s power as a gatekeeper? Which brands could anchor a buy-and-build? These questions pinpointed levers that had not featured in the inherited plan. The overall growth ambition expanded. And in a matter of weeks, we established a common understanding of the new landscape, which would have taken months to emerge organically.

At an apparel retailer with a continuing management team, the diagnostic served a different purpose. Management was experienced and deeply familiar with the business, but perceived a marketing problem, based on market share data. The data appeared to show consistent share losses among younger customer segments with gains among older customers. Maybe advertising models were too old, or ranges were too conservative?

But management also talked about exceptional brand loyalty. The diagnostic asked a different question: could the share changes be explained by the collective ageing of a consistent loyal customer cohort? Further analysis confirmed it. The implication was significant: the challenge was a different sort of marketing problem. Not one of positioning, but instead one of recruiting a new cohort without alienating the loyalists sustaining the business. That reframe changed both the strategy and the sequencing of the new plan.

With a confident investment thesis and a thorough commercial diligence pack already in-hand, a rapid diagnostic feels like it could be a “nice to have.” But experience suggests that bypassing it is a false economy. It stress-tests the assumptions underpinning the value creation plan. It gets the whole management team onto a consistent factual footing before priorities are set. And it also establishes the value creation director’s credibility to lead the harder conversations that follow because every functional leader has been listened to, their knowledge has been pooled rather than isolated, and none of them feels exposed when the planning process begins.

The Value Creation Plan

In both the cases explored above, the rapid diagnostic fed directly into a value creation plan. The target in each was 100% EBITDA growth. One plan was built while a new team was finding its feet, the other was built for a team that was well established.

We began each process by assembling a complete list of opportunities. Using a combination of one-on-ones and workshops we gathered everything anyone in the business believed could move the needle. We kept each of these ideas on the table throughout prioritisation process, so that nothing was deprioritised by omission, leaving nobody with unanswered questions.

We then assessed each opportunity against a consistent set of metrics: size of the prize, capital requirements (separating CapEx from OpEx, which matter differently for EBITDA and covenant compliance), gestation period, and capability. We quantified each metric and put it back to the team for challenge. The most useful responses were the ones that pushed back on a number. “How did you calculate that?” signalled genuine engagement, and maybe the opportunity to improve an assumption. From there, the conversation became analytical rather than positional. If someone argued that an initiative carried strategic value we had not captured, the task was to ensure it was quantified and point to where it should show up in the numbers. By the end of the process, both management teams had signed up to a set of priorities they had shaped, tested, and could not easily disown.

Having worked through the metrics in one-on-ones, we plotted the opportunities and used the output as stimulus material for a prioritisation workshop.

The workshops led us to a three-horizon output: resource now, research now with a view to resourcing next year, and prepare for the next owner. Framing it that way meant no viable idea was simply dropped, and it pushed both teams to think from day one about what a future buyer would want to see. That thread runs through to the final article in this series.

We then took each of the boards through the output of the workshops, recast on a risk basis. The two sponsors needed to see conservative banking scenarios to have confidence on covenant and valuation impact. The sponsors also wanted to see what it would take to deliver more, faster - answered by the management scenario, and also a “bigger ambition” scenario.

The children’s TV and apparel cases were different in almost every respect: sector, management configuration, market dynamics, and the starting point for the plan. What held constant was the process. The rapid diagnostic and the value creation plan ran in sequence, not in parallel, and the planning framework travelled across both situations without modification. The table below maps what each stage delivered in the two cases.

The sectors, the teams, and the starting points could hardly have been more different. The process was identical.