WE BOUGHT THE COMPANY - setting up the management of the newly acquired company

Posted by: 28. 8. 2024
Update: 17/5/2025

In the last articles, we focused on the initial steps of integrating the newly acquired company, including changing the articles of association and integrating the company into the existing organizational structure. Today we will again focus on the next post-acquisition step: setting up the management of the newly acquired company. This includes (not?) delegating business management, choosing the best management options, structuring authority between company bodies and defining the roles and responsibilities of individual bodies.

1. Corporate governance?

Corporate governance and governance, respectively Corporate Governance, refers to system of rules, procedures and processes, according to which the company is managed and controlled. It balances the interests of the company's many stakeholders, including shareholders, management, customers, suppliers, financiers and possibly even state authorities. Well-adjusted management and administration ensures that the company operates efficiently, complies with legal and ethical standards, achieves its strategic goals and generates the desired profit.

2. Delegate business management?

One of the first steps in setting up management is to consider whether we can manage the company ourselves, or whether we would rather use the delegation of business management for professional management. This process also includes the identification of key roles themselves so that we can properly consider the demands of each role. Key steps include:

Identification of key roles: Identify the essential roles needed for effective management, such as CEO, CFO, COO, and department heads.
Competency assessment: Assess the skills, experience and competencies of potential candidates in the acquired company and parent organization.
Assignment of Responsibilities: Delegate specific responsibilities to selected individuals or teams, ensuring each role is clearly defined and understood.
Consider professional management: Sometimes it just pays to choose the pros.

3. Choosing the best option

Choosing the best management option depends on a variety of factors, including the size and complexity of the acquired company, the strategic objectives of the acquisition, and the existing organizational structure of the parent company. Consider the following options:

Current management: Retaining existing management can provide continuity and leverage their knowledge of the company's operations and market.
Managers from the parent company: Incorporating managers from the parent company can ensure alignment with the parent company's strategies and practices.
Hybrid approach: A combination of members of existing management and managers from the parent company can provide a balanced approach that utilizes the strengths of both.

4. Division of powers

Effective management requires a clearly defined authority structure in the company. This includes defining the roles and responsibilities of each individual body and creating a framework for their decision-making. Key bodies traditionally include:

Board of Directors: The board of directors (in the case of a limited liability company, an executive or board of executives) is responsible for overall management, strategic direction and supervision. Key functions include approving major decisions, monitoring performance and ensuring compliance with legal and ethical standards.

In the case of a joint-stock company, it is important to consider the so-called German model, in which the members of the board of directors are elected by the supervisory board. This shifts the real power in the company to the supervisory board.

Executive Management: The executive team led by the CEO is responsible for day-to-day operations, implementation of the strategic decisions of the board and management of the company's resources.
Committees: The establishment of committees such as the audit, risk and reward committee can improve governance by focusing on specific areas of oversight and expertise.

5. Defining the roles and responsibilities of individual bodies

It is important to determine exactly what function is to be performed by which body of the company. First of all, it is important to decide which bodies the company will have and which will be real formal elected bodies and which will only be an internal organizational solution. Some bodies must always be formed by the company (statutory body, supreme body), others are compulsory only for some (supervisory board), while there may also be elected bodies that are not directly prescribed by law, so-called optional bodies. In that basic and common concept, however, the functions of individual organs can look as follows:

Board of Directors

Business management: He conducts business management of the company, formally represents it externally, decides on fundamental issues (unless the general meeting, as the highest body, has to decide on them).
Performance monitoring: Regularly reviews the company's performance against set goals and KPIs (i.e key performance indicator).
Risk management: Identifies and manages risks, ensure appropriate risk mitigation strategies are in place.
Compliance and Ethics: Ensures that the company complies with legal regulations and ethical standards.

Executive management

Operational management: Oversees day-to-day operations, ensure efficiency and effectiveness, executive management in the truest sense of the word.
Strategy implementation: Implements strategic decisions and initiatives of the Board of Directors.
Resource Management: Manage company resources, including finance, human resources and property.
Reporting: Provide regular reports to the Board on performance, risks and key issues.

Committees

Audit Committee: Oversees financial reporting, internal control and audit processes.
Risk Committee: Identifies, assesses and manages risks, ensures appropriate risk management frameworks.
Remuneration Committee: Establishes and reviews compensation policies for managers and key personnel, ensuring alignment with performance and strategic goals.
ESG Committee: Ensures the supervision of compliance with ESG (Environmental Social Governance) goals and reporting (we will talk about ESG and compliance in general in future parts)

6. Monitoring and evaluation of effectiveness

Ongoing monitoring and evaluation are essential to ensure effective management. Key steps include:

Performance reviews: Conduct regular reviews of the performance of the board, executive management and committees.
Management audits: Conduct regular management audits to identify areas for improvement and ensure compliance with best practices.
Feedback mechanisms: Implement feedback mechanisms to obtain input from stakeholders and address concerns.

záver

Effective management is key to the success of the newly acquired company. By carefully delegating business leadership, choosing management, selecting the best management options, structuring authority among company bodies, and clearly defining roles and responsibilities, you can ensure that the company operates efficiently, adheres to legal and ethical standards, and achieves its strategic goals. In our upcoming article, we will take an overview of specific aspects of compliance, which is a hot topic especially with regard to the new CSRD directive and the expansion of ESG reporting.

Do you need advice or representation at purchase of the company? Do you have any questions about our series or the management setup of the newly acquired company? Contact us! We have many years of experience in buying companies!