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Solar power success: merger and acquisition process using PRINCE2

Case Study

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Solar power success: merger and acquisition process using PRINCE2

Case Study

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  • Case Study
  • Project management
  • Project planning
  • Project progress
  • PRINCE2

Author  Andrea Vecchi

Andrea Vecchi, Head of PMO, Sonnedix,

August 3, 2020 |

 12 min read

  • Case Study
  • Project management
  • Project planning
  • Project progress
  • PRINCE2

Sonnedix is a fast-growing global independent power producer (IPP) with a proven track record in developing, financing, building, and operating high-performance, cost-competitive solar power plants around the world. Established in 2009, Sonnedix had a vision of harnessing the power of the sun to build a bright future and their aim is to be the market’s leading organization in the solar sector.

Project delivery plays a huge part in the activities at Sonnedix. This case study details how the PRINCE2 and PRINCE2 Agile methods enabled Sonnedix to scale and optimize its merger and acquisitions process successfully.

1. Introduction

Introduction

Sonnedix is a fast-growing global independent power producer (IPP) with a proven track record in developing, financing, building, and operating high-performance, cost-competitive solar power plants around the world. The organization was formed in 2009 with a vision of harnessing the power of the sun to build a bright future. This vision has not changed, and the company board and shareholders are passionate about combating climate change by reducing carbon dioxide emissions related to electricity production.

Sonnedix’s aim is to be the market’s leading organization in the solar sector. By adding megawatts of photovoltaic modules to its portfolio, more fossil-fuel-generated electricity will be replaced by its solar-generated electrons.

Effective project delivery is central to Sonnedix’s activities. This case study will explain how the PRINCE2 method helped Sonnedix to scale and optimize its merger and acquisitions (M&A) process sustainably, keeping resource needs under control while increasing the company’s portfolio.

2. Background

Background

M&A is the process of acquiring operating solar plants from sellers who prefer to sell their assets, rather than profit from the revenues that come from selling electricity. For the past decade, many sellers and buyers have been exchanging assets in Europe.

At the turn of the century, renewables were seen as panacea that would halt carbon dioxide emissions. However, it was still far cheaper to produce energy from fossil fuels. Essentially, the renewable business became niche. Under the increasing threat of climate change, many European countries deployed waves of state incentives between 2005 and 2012 that aimed to kick-start green electricity generation. These incentives closed the financial gap between fossil fuel and renewable energy production and pushed investors to build solar plants; many saw an opportunity to add a second profit stream to their core business.

It was not unusual for landowners to repurpose agricultural land to become a solar plant or for industry owners to cover their warehouse roofs with solar panels.

Soon, operators found that being a solar power producer is not just about selling electricity at a hefty tariff but also managing the business-as-usual side of the plant. Responsibilities such as asset management, operation and maintenance, and finance and administration pushed many owners to sell their assets. Sonnedix was one of the first organizations willing to buy them.

2.1 Project Mandate

During 2017, it became clear to Sonnedix’s senior management that the high pace of M&A activities was stretching company-wide resources. The excessive workload and ineffective communication were serious issues. Additionally, many more organizations started to realize the potential of the secondary solar market, and competition became harder, pushing down margins and shortening timescales.

The company looked for a means to address these challenges to enable the rapid scaling of more effective M&A processes. I was recruited to optimize the M&A process so that Sonnedix could grow while maintaining its role as a market leader.

2.2 Stakeholders and the Project Team 

I had the full backing of the company’s leadership from the outset, when I started to look at the key project stakeholders. On the other hand, I did not know how the users felt about the project. Typically, the people responsible for executing a project have a neutral or negative attitude towards external elements who try to change the way they work.

To mitigate this risk, the head of the M&A team became the project executive so the project had a sponsor with authority and trust. The head of M&A could also act as senior user and senior supplier, having been a M&A project manager (the users) previously and being responsible for the overall performance of the M&A team (the resources needed to execute the project) currently.

As an additional measure to manage the potential negative attitude of the users, I minimized the time the M&A team had to dedicate to my project so that it would not disrupt their day-to-day work. After consulting with the executive, I selected two team members from my project: the most experienced M&A project manager and an experienced financial analyst. The aim was to obtain quality information in a short amount of time. Figure 2.1 shows the structure of the team.

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Figure 2.1 The project organization chart and key project stakeholders

2.3 From the mandate to the business case

The project mandate was clear: enable the organization to execute a higher number of M&A projects while keeping the required resources as stable as possible.

The next step was to take the business mandate and build a business case, showing that the project could generate the benefits that the senior management expected. I was new to the organization, so I had to understand the current status of the M&A process and establish the baseline. I listened to the user’s issues and suggestions so I could deliver tangible benefits for them.

3. The project

The project

3.1 Project Environment

I quickly learned that M&A activities are made of a continuous flow of projects characterized by tight deadlines and high-intensity work. Project milestones, in many cases, cannot be negotiated: they are decided by the seller of the asset rather than by the buyer. We had to ensure our processes remained agile.

Support from other departments, including legal, technical, finance, and administration, is essential for the success of each project and must be available on a very short notice. The workload is very difficult to predict because the opportunities for new acquisitions can vary greatly in size and complexity, depending on what is available.

Every M&A project can be divided into three sequential stages with boundaries marked by a go/no-go decision point. Before this project, the M&A process was followed within the organization but there were differences in the execution of project tasks, depending on who was executing the task.

The first stage, called pre-screening, is where the assets in the market are analysed and a first non-binding offer is made based on limited information. If the offer is accepted by the seller, more information is made available and a due diligence stage is executed, generating a binding offer to acquire the asset. If the binding offer is successful, the terms and conditions of the purchase are negotiated until the acquisition is successfully completed by both parties signing a sales agreement. These stages are illustrated in Figure 3.1.

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Figure 3.1 The three stages of the M&A project

Sonnedix employs experts with a strong sense of ownership and ethics. I knew we already had all the required knowledge and tools to deliver best-in-class projects. We just needed to create a framework where clarity and collaboration could flourish; we did not need to change the ways teams were working. The most common issues I found were related to ineffective communication between departments, and the timing of the work.

3.2 Outlined Business Case 

The business case outlined the delivery of two outputs:

  • To maximize the efficiency of every part of the M&A process by eliminating low-priority tasks from the process so that less effort is required to achieve each task.
  • To record and standardize the process and tools so that everyone understands the project environment.

These outputs would generate the desired benefit of increasing the organization’s capacity to deliver projects, with the added value of creating tools quickly that could launch the process to new countries of operation, if the opportunity arose.

Even though the mandate did not have a clear timeline to complete the project, we committed to a timeline of four months.

3.3 Measurable Benefits 

When the business case was prepared and agreed, I started defining measurable benefits. They were:

  • reduce the number of work hours required to complete each project by 20%
  • keep the M&A project success rate unchanged
  • deliver one project guideline and develop as many standard templates as possible to be used in each project stage.

I had to determine the baseline data against which I could measure my benefits. The M&A team kept track of every project they were managing in a register. This register contained financials, milestone dates, and other information, such as project team members and external advisors. I studied the register to determine which metrics I could work on.

Not every M&A project manager was recording the same data in the same way. I observed that the data variance was extremely high, but I was unsure whether the variance was due to environmental factors (such as the regional market) where the acquisition was made, or simply a need for greater standardization. To understand the information, I created a few charts that showed important project metrics. I sat down with the executive to understand how to read the data results.

Following this discussion, I reduced the sample data to eliminate those extreme cases that were due to exceptional market conditions. Figure 3.2 shows a graph showing historic durations of the pre-screening stage. Figure 3.3 shows a graph of historic overall project durations.

Figure 3.2 Historical data to be used as project baseline; duration of pre-screening stage


Figure 3.2 Historical data to be used as project baseline; duration of pre-screening stage

Figure 3.3 Historical data to be used as project baseline; overall M&A projects duration


Figure 3.3 Historical data to be used as project baseline; overall M&A projects duration

We concluded that one metric of particular importance was the duration of the pre-screening stage. We therefore agreed to set the 20% reduction objective not on the overall project, but just to the pre-screening phase. In fact, for every successful non-binding offer, about 8 offers had to be prepared. Therefore, optimization in this stage would save a significant number of working hours. We decided to measure the current conversion rate between the project stages and monitor any change subsequent to the end of the project. This would have been a good platform for future M&A improvement projects, and it would allow reliable forecast metrics to be applied to future projects. With the new validated data sample available, I was able to table four baseline metrics (numerical data are not shown):

  • average time to complete a successful deal
  • average time to complete a non-binding offer
  • conversion rate from non-binding offers to due diligence
  • conversion rate from due diligence to acquisition

From this, I defined four project goals:

  • average time to complete a successful deal: to be unchanged or improved
  • average time to complete a non-binding offer: to be improved by 20%
  • conversion rate from non-binding offers to due diligence: to be unchanged or improved
  • conversion rate from due diligence to acquisition: to be unchanged or improved.

It may seem unusual to have three quarters of goals set as ‘to be unchanged’, but when undertaking a project that affects a process end to end, it is important to control as many variables as possible to clearly understand the impact of the implemented changes. Being able to measure both benefits and dis-benefits allows the organization to better determine whether the project was successful.

3.4 PLANNING

3.4.1 Project plan

The project plan largely followed the typical structure of an improvement project. I used some of the Agile techniques learned from my recent PRINCE2 Agile® course, such as favouring informal communication and leveraging minimum viable products and visual communication tools, such as dashboards.

The following delivery stages summarize the executed work:

  • map the existing project process through interviews and analysing existing data
  • identify areas of improvement, especially low-priority activities
  • execute the improvement by training the project team and releasing new templates
  • formalize the new process in a project guideline
  • set up tools to measure the improvements.

While I was mapping the M&A project process, I identified gaps against the 7 PRINCE2 principles so that the standardization would bring improvements not only in terms of increasing the efficiency of the existing process, but also in the overall quality of the project. Although this aspect was invisible (and of little interest) to the users, it was extremely important for me, as PMO, to begin implementing PRINCE2 across the organization, creating the platform for future PRINCE2 projects in other areas of the business.

3.4.2 The communication plan

In the earlier days of the project, I ensured that the head of M&A and the rest of the leadership team clearly communicated the importance of the project to all the stakeholders so that I had the authority to change existing ways of working.

As a project manager, I kept the communication informal, through face-to-face meetings and video conferences rather than email. When a new product was completed, such as new forms and templates, I immediately gathered feedback from the team to understand whether the new product was adding real value.

3.4.3 The quality management plan

To ensure the quality of my project outputs, I planned to follow the PRINCE2 Agile principle of leveraging minimum viable products. In essence, every time I had a new product, such as a template or an updated workflow, I aimed to get a draft version in front of my users to obtain their feedback in the shortest possible time. This way, I could avoid wasting time on products that users would not like or want.

This is an essential part of working on internal projects and must be communicated to the stakeholders. Minimum viable products are not poor-quality products, but useful tools that can be used to obtain valuable feedback and reduce the time to develop the final product.

3.5 Project Outputs

To show benefits to the M&A process users, I set a series of intermediate outputs so that I could make improvements without creating shockwaves to the existing process. For example, during the mapping stage, I aimed to identify and deliver templates that the team could use to complete some of the repetitive tasks, such as writing a memo or collecting financial inputs. They were immediately available to the team. I wanted to indicate that the goal was to standardize, not bureaucratize, the existing M&A project processes so that less time would be wasted.

I decided to develop a dashboard very early on. The pre-existing M&A tracker could be visualized intuitively, focusing the reader’s attention on key milestones and metrics. This tool, which was not originally in the project scope, was added to provide a visual management tool, as recommended by PRINCE2 Agile.

The dashboard was produced using a collaborative tool called Smartsheet, drawing data from the existing M&A projects register. It is shown in Figure 3.4.

Figure 3.4 M&A Dashboard mock-up

Figure 3.4 Mock-up of the M&A projects dashboard

Finally, a key output was to train the team to execute M&A projects in the improved way. Even if the new project guideline captured details of which tasks had to be executed and by who, together with a list of standard deliverables for each stage, the sole distribution would not be a guarantee that the users will change the way they run the projects. The guideline is an essential tool to ensure that the new baseline of the process is clear and documented, but it is mainly a tool for the PMO and not for the users. A new way of working is only adapted through training and oversight of the day-to-day activities, not by reading a document.

3.6 Project Timeline

    • The project was executed in four months, between February and June, in 2018. This included:
    • one month to map the process
    • six weeks to identify and execute process improvements, launch new templates, and develop live metrics tracking (the dashboard)

    one month to develop the new guideline and train the team in the improved processes.

    4. Conclusion

    Conclusion

    I am pleased to say that the project has been a significant success.

    I delivered an optimized process that is complemented by new standard templates and is clearer and more efficient on individual tasks. The new process resulted in a measured decrease in the time needed to complete the pre-screening stage. Communication is no longer a prevailing issue; the team works collaboratively, and the M&A dashboard is used to gather project information prior to meetings and phone calls. This means that communication between functions and teams is now of a higher quality. The teams can now plan their workloads with more accuracy.

    The biggest success, however, lies beyond the metrics; it is in way users perceive the result of my work. This project created solid foundations that are being used to deploy new project management methods across the whole organization. The success of the M&A process standardization has allowed me to initiate similar projects across other departments. I have received recognition for my efforts within the organization, advancing my personal career goals.

    I have also been able to internally promote and celebrate the PRINCE2 method. For example, I started a project management training programme based on PRINCE2 for people in Sonnedix in an effort to embed a project management mindset across the business.

    Another major factor that contributed to the project’s success has been the PRINCE2 principle of tailoring, which allowed me to execute a PRINCE2 project while keeping the tools and management products simple so that we could quickly move from one stage to the next, as well as defining clear roles and responsibilities within the project team. It also ensured that the head of M&A, acting as project executive, was committed and active.

    The use of PRINCE2 Agile techniques, such as creating minimum viable products to obtain user feedback quickly and favouring visual management and informal communication, have added a great amount of value to the project and made the project’s products, outcomes, and benefits much more understandable.

    The standardization was successfully completed, with all the original outputs delivered over a year ago. We have continued to apply the learning from experience principle and have been running lessons learned sessions at regular intervals in each of the countries where we execute M&A activities. This allows for new areas of improvement to be continually identified and launched, and new users to gain an in-depth understanding of the methodologies in place. Now, I am looking for marginal improvements rather than major changes, so that we can keep the project’s momentum going while almost eliminating the need to run training sessions; any new improvement is easily learned on the job.

    5. References

    References

    Axelos, (2017). Managing Successful Projects with PRINCE2® 6th Edition, TSO

    Axelos (2015). PRINCE2 Agile® Guidance 1st Edition, TSO

    6. About the author

    About the author

    Andrea Vecchi is Head of PMO at Sonnedix, a global renewable energy IPP. He has many years’ experience of project management and establishing and running a PMO.

    He is qualified in PRINCE2, MSP, P30 and PRINCE2 Agile.

    7. Download

    Solar power success: merger and acquisition process using PRINCE2