Typically, “nearshoring” refers to the transfer of business operations to a nearby country – often in pursuit of cost savings. Many companies also look to acquire existing nearshore operations as they expand. If you’re considering a nearshore acquisition, you probably know that big improvements in infrastructure and the operating environment have made it a lot easier than in years past. Nearshore acquisitions are an exciting space to be in, but there are several unique issues that make acquiring a nearshore operation different than acquiring a company domestically.
From our experience with nearshore acquisitions and in our discussions with clients who have completed deals, Metre22 has gathered several insights. Here are four important lessons that can tilt the odds to greater success.
- Lead local. One of the most important decisions to be made is the answer to the question “who is going to run this thing?” The person at the helm is key to capturing the full strategic value, and the boots you already have on the ground are essential. Personal relationships, trust and knowledge of the culture are tremendous qualities for any manager, and someone already embedded in the area will have a leg up on all three of these aspects. Professionals in nearshore locations operate in very tight communities. Clients have noted that these managers bring with them an employee following as well as deep knowledge of the competition. Because acquiring firms want to move fast, a local manager has an advantage over a transplant.
- Be there. “You have to be down there and be there for longer than you think,” the chief operating officer of a finance company told us. This COO had experience in Honduras, Mexico and Jamaica. In every acquisition, he made trips to the site every week for about four months to make sure local management knew they had the support of the parent company. Just as important, he made sure managers were mentored on new processes and had help in navigating the resources of the larger company.
- Recruit constantly. The tight-knit community typically found in the locales chosen for nearshore operations usually means local management knows what the competition is doing operationally. It also means these managers know what competition is doing to compensate their employees. This makes for a highly elastic environment when it comes to wages and perks, and if a manager leaves, so will a contingent of employees. Diligence is key: If you are the acquiring company and want to avoid a never-ending battle over wage changes, you need to clearly demonstrate why managers should stick around.
- Introduce clients. Giving your customers a look-see is always important. This is especially important if the nearshore site will face or directly serve customers, for example if you are acquiring a business process outsourcing (BPO) operation. Introduce customers to the site and the manager as soon as feasible. This helps them get comfortable and gives the manager the opportunity to hear directly from the source what the customers are looking for. And it reinforces to managers the fact that they are a part of something bigger and play a major role in a much larger picture.
Companies who choose to make a nearshore acquisition expect a concrete, strategic value from the start. Choosing the right manager and following a few important steps will make that value a reality.