You need to take a long term view of the acquisition
We have been told many times that acquisitions often fail to achieve their investment objectives, but few people have ever pointed out how difficult it is to manage a new subsidiary at a distance if you have never done it before. If you have become accustomed to meeting with your managers on a frequent basis and getting first hand reports of activities, imagine how you will feel if that is no longer possible. What if your new business unit is in a time zone several hours different to yours and a visit consumes a day’s travel each way. What we often forget in undertaking an acquisition is that we might need a completely different approach to managing when time and distance intervene.
When I was the president of a UK software business, we acquired a software supplier in San Diego. My intention was to establish a personal presence there for 3 months, settle the business in to a new direction, promote one of the local managers to take over and go back to the UK. What I had failed to recognize was that the prior two owners worked on site and had their fingers on every aspect of the business on an hourly if not daily basis. When I started to request performance information from my UK location, I found that the underlying data collection and reporting systems were not up to the task. I also discovered that the new manager was not used to weekly and monthly performance reporting and really had little idea of what was required to run the business or what we needed to monitor at a distance. I ended up sending my CFO to San Diego to install a budgeting system and a weekly and monthly reporting management pack. It was only once these systems had settled in that I had confidence that I could monitor the business from a distance and intervene only when it was necessary.
It is impossible to manage effectively from a distance without good reporting systems
What is very clear to me from this experience is that you cannot micro manage another company from a distance and that the costs of active management monitoring on site is prohibitive from an executive time and cost viewpoint. What is required is that you have a well thought out performance setting and reporting system ready to go as soon as the dust settles on the purchase agreement. You might also think very hard about who is to manage the new subsidiary. While there are benefits in using someone from the existing operation, you need to think about how quickly you can settle the firm into a proper operations monitoring and performance system if they have not worked under that discipline before.
More than anything else, you have to put yourself into situation where you can anticipate problems before they become crisis. A good management reporting system underpins that objective. You might also consider setting up a local Board of Advisors or Directors to provide advice and guidance to local management and to give yourself a higher degree of comfort of local governance. In the end, you will have to rely on local management but this should be supported by good reporting systems.
