ACQUISITIONS ARE A TEMPTING WAY TO INCREASE THE SIZE OF YOUR BUSINESS BUT DON'T UNDERESTIMATE THE INTEGRATION EFFORT REQUIRED POST THE EUPHORIA.
We have been personally involved in a number of acquisitions. A couple of examples have been highlighted below.
Niaga Securities, Indonesia
Niaga Securities was one of the foremost stock brokers based in Indonesia. Based in the Niaga Tower on the 21st floor this business offered a UK bank a foothold in the developing economy. As part of the due diligence process the physical offices, the staffing and the systems were to be reviewed. On the first evening of due diligence the physical security of the offices were tested by burglars entering the premises via the air conditioning ducts. Whilst the perpetrators were caught, dealing with local law enforcement was a challenge that is not easily forgotten. Niaga Securities became a successful addition at the end of the day, however dealing with significant time zone differences, different systems, staffing in an exponential economy and local cultural practices consumed significant resources. In this case, the local customers and knowledge outweighed the set up of a new clean operation.
Hidrosib
As part of a proprietary deal by Preen, Hidrosib was acquired by Advanced Handling from the Romanian Government in a Euro 10m+ deal. Hidrosib, based in Transylvania originally manufactured weapons for the Russian Army. When acquired the 10 hectare site was producing hydraulic pumps as its main product set as well as running a foundry on the site. The acquisition took place just prior to European accession and therefore the deal was based not only on the savings which could be generated to Advanced Handling's hydraulic component purchasing but also on a view that land and building prices would rise post accession. Challenges emerged straight away, with three unions resisting operational efficiency changes and also the amount of effort it took to deal with an Eastern bloc culture. Over time Hidrosib's land and buildings were optimized and invested in leading to a successful sale of this business and its parent to Metalrax.
As part of the optimization the fences were fixed and painted and there was no requirement for the 'watch tower' or the loose German Sheppard........who was reassigned to his owner's home.