Reply To: Retaining target's existing management to ensure forecasted growth

#108855

Korath Wright
Participant

It makes sense that the people who have been the most responsible for producing value in the past would be best equipped to produce that same value in the near future. This lends to the idea of keeping existing management as a means to help ensure forecasted growth.

Notwithstanding, with well aligned incentives for existing management may be able to increase the company’s performance. They are after-all the team in the position to be the most informed about the company’s performance and capabilities.

However, current managers may not be the best people available for the job. Taking into consideration the change management implications and availability of HR candidates, there can sometimes be a case made for increasing a company’s value through a change in management. Installing new management to generate more value from an underperforming company is a well visited acquisition strategy, such as with activist investing.

Aspects to consider when deciding how to plan around management could include:

❏ Impacts on service/customers, staff and business lines.
❏ Availability of candidates and their expectations.
❏ Historical performance.
❏ Cultural fit.
❏ Timelines.
❏ Industry knowledge/relationships and IP loss.
❏ Morale deterioration and opportunities for internal advancement.
❏ And many others depending on the situation.

It can be difficult to evaluate what the impact on the company will be from managers and other key people staying or leaving. Especially in larger and bureaucratic companies where who is being productive can be counterintuitive. This, and in many other situations is where examination of which factors are important and how they apply to the situation specifics can provide insight.

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