Acquisition KPI integration
By Derwin Lucas ·
Acquisition KPI integration is the work of bringing a newly acquired company’s metrics into portfolio reporting so that they mean what the rest of the portfolio’s metrics mean. On the day a deal closes, the add-on keeps reporting under the definitions it arrived with. Until those definitions are mapped to the portfolio’s, its figures can be added to a total but not fairly compared with the other brands.
This guide covers why an add-on’s KPIs don’t drop straight into portfolio reporting, what goes wrong in the first months, and a sequence for integrating them without replacing the add-on’s systems. All figures are illustrative.
Why an add-on’s KPIs don’t drop straight in
An add-on arrives with its own systems, its own definitions and a reporting history built for a different owner.
Its close rate, cancellation rate and gross margin were defined for the people who ran it before, and the figures in its sale materials were prepared for a sale. Neither was built to match your portfolio’s definitions. The add-on may count a sale when a contract is signed while your portfolio counts it net of cancellations, book commissions in a different place, or carry none of the shared-service costs your other brands carry. Each of these is reasonable on its own terms. Together they mean the add-on’s first figures in your reporting are measured differently from everyone else’s.
What goes wrong in the first months
Integration problems tend to appear the first time the add-on’s figures sit beside the rest of the portfolio.
- It is compared on day one. In one illustrative brand’s month, 10 of 30 demonstrations became gross sales and 8 survived cancellations. An add-on that counts gross sales reports a 33% close rate where the portfolio’s net definition would give 27%, from the same records. See the four close rates →
- It looks more profitable than it is. An add-on reporting EBITDA of $1,500,000 before its $150,000 share of shared-service costs will report $1,350,000 once it carries them. See the overhead allocation case →
- Its history is mixed with the portfolio’s. Months from before the acquisition, built on the old definitions, flow into growth rates and trailing twelve months as if they were like for like.
- Its deal adjustments keep coming back. Adjustments accepted at the transaction continue to be added back after it, whether or not they still qualify. How adjustments are reviewed between deals →
None of these needs anyone to make a mistake. Each happens by default unless the integration is planned.
A deal closes on one day. Comparability arrives when the definitions do.
A sequence for integrating an add-on’s KPIs
Inventory the add-on’s measures, map them to the portfolio’s definitions, decide what can be restated, and record each decision.
1 · Inventory what the add-on measures
List the measures the portfolio relies on, and for each one record how the add-on calculates it, in which system, and who prepares it.
Ask for the calculation, not just the figure. A close rate without its numerator and denominator can’t be checked against anything.
2 · Map each measure to the portfolio definition
For every measure, write down where the add-on’s definition matches the portfolio’s and where it differs.
The differences are the integration work. A difference you have recorded can be managed; one you haven’t will surface later as an unexplained change.
3 · Decide what can be restated
Where the add-on’s records allow, restate its figures under the portfolio definition; where they don’t, report them with the limitation stated.
Record-level data can be recounted. A monthly template of totals can’t be recounted, and a rate submitted without its counts can’t be restated at all. Missing figures are stated as missing, never estimated.
4 · Set the history boundary
Decide which pre-acquisition months can be restated, and mark the series where they can’t.
Keep months built on the add-on’s old definitions out of like-for-like comparisons until they have been restated, so a growth rate never compares two different calculations. If the add-on joins mid-year, state the months it covers in every year-to-date figure that includes it.
5 · Agree the reporting route
Take the add-on’s data in the form it already holds: a connection, an export, an extract or a monthly submission.
Moving the add-on onto the portfolio’s systems may be worth doing later. It isn’t a prerequisite for reporting it on the portfolio’s definitions. Does this mean replacing systems? →
6 · Record who approved the mapping
Write down who approved each mapping and when, so the basis of the add-on’s figures can be shown when a lender, board or buyer asks.
The CFO should approve the mappings for measures the board and sponsor rely on.
Report before you compare
Until an add-on’s definitions are mapped, report its figures without comparing them with the other brands, and say why.
You can still include its figures in portfolio totals where the basis allows, as long as the add-on is named and the limitation stated. Set a target month for the add-on’s first comparable figures, and report progress against it: which measures are mapped, which are restated, and which are still reported only. In Goverisyn, every figure carries an evidence state: Substantiated, Qualified, Limited or Not Available. What each state means →
Questions to ask a target during diligence
Ask how each figure is calculated, not only what it is: the answers are the first draft of the integration.
- How is a lead, an appointment and a demonstration counted, and in which system?
- When does a contract count as a sale, and are cancellations and financing declines deducted?
- Which month does a sale, a cancellation or a completed job belong to?
- Where are commissions, financing fees and installation labor booked?
- Does reported EBITDA carry any shared or owner-level costs, and which adjustments are proposed?
- Which figures can be traced to individual records, and which exist only as totals?
- Who prepares the monthly figures, and has the method changed in the last two years?
Where to start
Start before the deal closes, with the measures your board and sponsor rely on most.
Answers to the questions above make the differences known before close rather than discovered after it. Goverisyn’s Portfolio Measurement Review does this across selected brands. The first step is a free 60-minute Portfolio Review, which needs no data in advance. For the related questions of comparing brands and keeping definitions stable, see How to compare performance across acquired companies, EBITDA comparability across portfolio companies and Definition drift in portfolio reporting.
Start with a Portfolio Review.
60 minutes. No data needed in advance.
By Derwin Lucas, founder of Goverisyn, with nearly three decades in management and information systems in home services. Published . About Goverisyn →