The Nearshore services industry saw its fair share of acquisition events last year, from Endava picking up Velocity Partners, to One Equity Partners taking ownership of a dozen OneLink delivery centers, and the purchases don’t seem to be slowing as we power into 2018.
In order to help with the acquisition process, Nearshore Americas compiled these six considerations that companies should make before picking up a new business in Latin America or the Caribbean.
Measure the Cultural Fit
Culture is a vital part of the Nearshore services industry, with dozens of countries bringing their own style of cultural influence to the workplace. For US companies, foreign cultures can often be jarring, but most countries in the Americas have been greatly influenced by the States, making the integration process much easier.
Even so, operational culture is not always aligned, as some countries have vastly different workplace practices that need to be considered. For instance, are your working hours the same? Do employees in the new company get more benefits or perks than your existing employees? And, perhaps most importantly, is the workforce already familiar with your brand?
So, besides the obvious financial health check and due diligence procedures, considering how comfortable both companies will be with each other over time will ensure that the acquisition brings home long-term returns.
Open Up Communications with Existing Clients and Suppliers
Mergers or acquisitions can often be viewed as a sign of weakness by clients, suppliers, and certainly competitors, so it’s vital to become acquainted with the main customers and vendors as soon as you can, especially if you are planning to change a few things.
A good approach is to single out the top 20 customers by the revenue they generate and arrange transparent face-to-face meetings to ensure they remain confident in the company. For vendors, whether you want to renegotiate a contract with them, cut them loose, or continue as normal, it’s best to address this early before there can be any dispute over services rendered.
As long as things are business as usual with no unexpected disruptions, there shouldn’t be any reason for customers or vendors to oppose the acquisition or flee from their relationship with the business.
Get to Know the Workforce
Whether your acquisition target is in the IT services, call center, or BPO space, the company is operating in the people business, so it’s those people you need to rely on to ensure a smooth transition and long-lasting success.
Chat with the top-level employees, such as supervisors, team leaders, and account managers, as the experience they have will go a long way toward keeping clients around. But, be careful about announcing the purchase too early, as it may trigger some employees to jump ship.
One way around this is to stipulate an announcement timeline in the purchase contract, with a clause that allows you to leave the deal behind if team members don’t stick around long enough to pass on their essential knowledge and insight.
Maintain a Strong Relationship with the Previous Owner
Arguably the most important person on the team is the owner, as they have been dealing with clients and employees at the top level for the longest amount of time.
If the acquisition is a straight sell and the owner has plans to leave the business behind, you should consider adding them to the payroll for a few weeks to help ease the transition with customers and staff.
At the very least, try to agree upon an open line of communication over a designated time period, as there are often unforeseen issues or situations that only the previous owner can address.
Gain an Understanding of Local Employment Regulations
While the United States has its own set of laws when it comes to running a business, those laws and regulations can often be far more complicated in some Nearshore nations, especially when it comes to employees.
One of the biggest headaches is handling layoffs, as Latin American employment law is generally contract based, so should be studied at length. Furthermore, mass layoffs are a different animal and must comply with local regulations, while notice and severance pay is commonly required by law.
Most importantly, whether you keep the existing employee contracts as they are or make a few adjustments, it’s vital to be transparent and keep your workforce in the loop to minimize the fear of job loss that M&As often produce.
Learn Everything You Can About the Local Industry Ecosystem
The success of BPO companies, call centers, and IT services providers is largely determined by their level of engagement with the local industry ecosystem. In most Nearshore countries there are numerous entities that both support and accelerate the sector as its social and economic impact increases.
Chances are you’ve already requested advice from the local investment promotion agency, so be sure to maintain a line of communication with the industry representative as you settle in – most of them can offer valuable data and ongoing assistance if you plan to expand.
Competition is also a huge factor to consider in this popular market. Analyze the biggest players in the country to be ready for the challenge, but also inquire about any industry clusters or chambers that you could participate in, as they will be invaluable sources of information.
Evaluate your merger and acquisition options with Next Coast Brokerage. We will give you insights on current valuations and the steps to take in pursuing a deal in the Nearshore region. Contact Spencer Ewald, vice president of Next Coast Brokerage, to learn more.
For more Corporate Coaching tips and advice, check out the following articles:
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- 8 Deal-Breaking Mistakes to Avoid When Hosting Prospects at Your Nearshore Location
Or visit our dedicated Corporate Coaching page by clicking here.