Is the company ready for a transformation process?

Transformation processes in businesses can involve many different strategic measures. We have gained experience from, among other things, the following types of processes:

1. Internationalization and scale-up

2. Restructuring into more efficient business units and changes in financial structure

3. Establishment of shared services, cross border "one company"

4. Digital transformation, innovation, and service development

5. New market orientation, integration of value chains

6. Cost reductions, downsizing, rationalisation of business processes and organization

In particular, we assist with preparations for a transaction or an integration process following an acquisition. In such cases, elements from the above list would typically be considered in a valuation setting.

For us as lawyers, it is important to understand transformation processes precisely because they bring legal framework conditions into play, and thus also our expertise. Before a decision is made on a transformation process, one should have a thorough understanding of both the factual and legal landscape.

Increasing complexity

However, there are trends in the present time that contribute to increasing complexity and make change processes challenging:

• A company today has more relationships, especially in the form of suppliers and supply chains, but also customer relationships can be more complex with a digital additional relationship.

• Markets are becoming more technologically driven, and changes in assumptions happen quickly. Things that just a few years ago were wise to invest development resources in have become freely available.

• Regulations are becoming extensive, not only concerning companies' roles outward toward markets and stakeholders but also concerning companies' inner life, often referred to as "compliance."

Touching one thing in a complex picture has many consequences, potentially some unexpected ones. Some of the unexpected consequences may be of a legal nature in addition to economic and human consequences.

In this scenario, a transformation leader faces a significant challenge. Especially because a transformation process typically has a clarified "before" and "after," making the exposure particularly significant. Therefore, a transformation leader needs a solid toolbox, and we have set out to provide the necessary resources. But a leader must know their tools.

Preservation of value drivers through the transformation processes

Most investors and buyers of businesses discount expected future cash flows in their valuation and must therefore assume that the company maintains its competitive advantages over the same time horizon. But what can one really say with certainty about future competitive advantages?

Cost-effectiveness receives a lot of attention among economists, but this constitutes a competitive advantage only until competitors streamline their processes according to the same textbooks. Some companies are so large that this in itself creates an "economic moat" against competition - until a "disruptive" player enters the scene and changes the market structure. For a Norwegian growth company, it is more likely to be precisely this "disruptor" than to be the largest on a global scale. Therefore, we would like to focus on the competitive advantages that can be supported by legal means.

How does law come into play?

Protecting the uniqueness of the company. A competitive advantage can lie in access to data that enables your company to deliver a better product than competitors. AI can be a way to harness the advantage of the accumulating amount of data, but it usually requires extensive analysis that delves into business processes, markets, and service development. The architecture should cater for intangible assets, not copyright lawsuits.

Another typical competitive advantage is expertise. Most Norwegian companies build their business on high competence within specialized market segments. At the same time, there is competition for expertise in a dynamic labour market. Those who win tomorrow's battle for expertise may be those who create the most inspiring workplaces and manage to set up good incentive schemes with the prospect of co-ownership.

Structural flexibility can also be a competitive advantage. How does the company operate within the legal framework to create a dynamic and adaptable organization?

The legal requirements for businesses are increasing in most areas, and authorities are sometimes accused of creating barriers to entry, i.e., rules that only the major players can afford to comply with. If this is the case, it becomes even more important to establish "smart compliance," i.e., routines that also provide value back to the organization.

These are some examples. We cannot tell you what competitive advantages your company should rely upon on in the future, but perhaps we can help draw a roadmap.