When does the acquirer company replace the target management?

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  • #57434
    Fahad Al Sulaim
    Participant

    at certain point of time the acquirer has to change the acquiree management especially in a case of oversee acquisition. When do you think that must happen? and which positions should they start with?

    #57444
    Nicoletta
    Participant

    Hi Fahad, I think that the target’s management should not always be changed. You could keep the executive team and perhaps send one general manager from overseas to integrate the company.
    In my opinion, the key positions that need to be well supervised by the acquirer are finance, sales, and hr. Again, this does not necessarily mean to change management but for sure to keep a close look and develop key relationships also with the second line of management.

    #86493
    Tim Lewandowski
    Participant

    I agree with Nicoletta – I dont feel that the target exec team always needs to be changed. However, I have found more value in a “buddy system” in which particular high performing/collaborative legacy executives spend time across the parent global org not only to learn the new operating standards but more importantly to aide in potential integration to a role within the larger org.

    #86501
    Max Eager
    Participant

    Great question.

    Timing and prioritization are key when considering management changes in an overseas acquisition. The timing for management changes generally depends on the specific circumstances and goals of the acquisition, such as cultural alignment, performance metrics, or strategic vision. That said, changes at the senior management level (e.g. CEO, COO, CFO) usually come first because these roles are critical for setting the direction and tone of the newly integrated entity. These changes often occur within the first few months post-acquisition, to help establish authority, ensure alignment, and kickstart integration efforts. Making changes too late could prolong the transition period and create uncertainty, but making them too early might disrupt operations if not done thoughtfully. Local cultural factors should, of course, be considered carefully in an overseas context, since leadership changes can have different impacts depending on cultural expectations and business practices.

    #87112
    brent harvey
    Participant

    This is a great question. Another consideration that is briefly touched on above is the strategic vision. To expand on this aspect, there are situations where retention of key management talent is integral to realizing the strategic vision and long term value of the deal such as technical know-how and top leadership talent.

    #87712
    Shantaram Nadkarni
    Participant

    It all depends on the vision and financial incentives. Contracts are signed with key management positions until certain objectives are met before they can move on.

    #90024
    David Casado
    Participant

    I believe that this is a case by case analysis and also depends on the reason for the integration. What it is important is to scrutinize the management in the due diligence process and have a clear view of the implementation once the deal is concluded. It is also key to identify the key employees in the acquired company and ensure their retention as part of the acquisition process in case it is deemed necessary by the acquiring party.

    #90093
    Kyle Froling
    Participant

    There are some great points that everyone has pointed out. I agree that there should not be a drastic change right away, that will kill culture and morale. The acquirer should include an employee retention clause and bonus in the SPA to keep things status quo until you find the right organizational structure to meet your goals.

    #90670
    Yvonne
    Participant

    Replacing target company managers in the integration phase may provide additional risks as they are the ones will their fingers on the pulse of the organization. It should generally be done if there is singficinat distrust. Generally, I have found it is best to keep management for a certain period (at least a year or more) until the integration is accomplished and replacement can be properly planned. In some cases, I have seen that the acquiring company sent in interim managers to work alongside with local managers.

    #91238
    Veronica R
    Participant

    The decision to replace a target company’s management should be made on a case by case bases. I agree with many of the statements above and would add that for many organizations, a C level role is brought in specifically to get a target company ready for acquisition. In that case, their role and goals may be met once the acquisition takes place and instead of aggressive change or scale that the leader may have specifically been brought in to achieve, the new goal is around stability and integration, which could benefit by having someone form the acquiring company step in. Depending on the type of organization and its goals, a shift in the C level is intended to drive change. According to a PWC study from 2018, “The study, which analyzed CEO successions at the world’s largest 2,500 public companies over the past 19 years reports that while the median tenure of a CEO has been five years, 19 percent of all CEOs remain in position for 10 or more years, consistently, over the time period analyzed.” So perhaps an acquirer should consider a level or two down in terms of which talent is required to stabilize and realize synergies and which are not.
    https://www.pwc.com/gx/en/news-room/press-releases/2019/ceo-turnover-record-high.html#:~:text=The%20study%2C%20which%20analyzed%20CEO,over%20the%20time%20period%20analyzed.

    #91449

    i also think is case by case and s important during the du diligence apart to understand the expectations of the executive management.

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