Corporate acquisitions and the integration of control systems

Owens, Jay; Sco , D. A. A icle Co po a e acquisi ions and he in eg a ion o con ol sys ems Sou h A ican Jou nal o Business Managemen P o ided in Coope a ion wi h: Uni e si y o S ellenbosch Business School (USB), Bell ille, Sou h A ica Sugges ed Ci a ion: Owens, Jay; Sco , D. A. (1990) : Co po a e acquisi ions and he in eg a ion o con ol sys ems, Sou h A ican Jou nal o Business Managemen , ISSN 2078-5976, A ican Online Scien i ic In o ma ion Sys ems (AOSIS), Cape Town, Vol. 21, Iss. 4, pp. 113-119, h ps://doi.o g/10.4102/sajbm. 21i4.925 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/218055 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by/4.0/ S.A J.Bus.Mgm 1990,21( 4) 113 Co po a e acquisi ions and he in eg a ion o con ol sys ems Jay Owens* and D.A. Sco G adua e School o Business Adminis a ion, Uni e si y o he Wi wa e s and, Johannesbu g, Wi s 2050 Republic o Sou h A ica Recei ed 22 Janua y 1990; accep ed 24 Ap il 1990 In his a icle he a i?~ app oaches adop ed by la ge acquisi ion-in ensi e co po a ions in in eg a ing con ol sys e!11s upon he_ acqu1S1~on o a. small company a e being in es iga ed. Fi e ma ched pai s o acqui ing and acqui ed companies mee mg speci ic p ede e mined c i e ia we e c ea ed, and de ailed in e iews conduc ed wi h k~y m~age s ~ ol ed in he acquisi ion and subsequen in eg a ion p ocess. A se o s anda d p oceedings o m eg a mg con ol sys ems a e ecommended ollowing he analysis o he indings. In _hie die a ~el. wo d ~ e skillende benade ings o gein eg ee de behee s elsels wa deu g oo oo name- geng ~ ~ ga usas1es geb uik: w? d, wannee ldeine maa skappye oo geneem wo d, onde soek. Vy pa e o ga usas1es, wa bes aan u1 die oomemende en die oo genome o ganisasie, is gekies olgends spesi ieke oo a bepaalde k i e ia. Ui geb eide onde houde is me die sleu elbes uu de s ge oe wa be okke was by die oomame en die ge olglike in eg asiep osesse. 'n S el aanbe elings i p osedu es by die in eg asie an behee s elsels wo d oo ges el op g ond an die be indinge an die onde houde. *To whom all co espondence should be di ec ed. I is gene ally accep ed ha i a business en i y is o su i e in an economic en i onmen , i mus g ow. The e a e only wo ways ha g ow h can be achie ed; he i s is h ough in e nal expansion, and he second is h ough he p ocess o me ge o acquisi ion. A s a egy o g ow h h ough me ge o acquisi ion is becoming an inc easingly popula al e na i e o in e nally gene a ed g ow h. In B i ain alone, du ing he pe iod 1965 o 1980 an es ima ed 12000 me ge s among publicly quo ed companies we e ansac ed (Wallum, 1980), while in he USA, he a e o co po a e linkings is es ima ed o be inc easing a app oxima ely 10.05% pe annum (Business Week, 1978). This phenomenon has no escaped Sou h A ica and has esul ed in he amalgama ion o many indus ial, comme cial, and inancial conce ns. Obe holze (1985) e eals ha be ween 1980 and 1984, he e we e 115 me ge s o acquisi ions in ol ing lis ed companies. Suppo ing his end, he Financial Mail (1985) commenced hei 1985 'Top Companies Special Su ey' wi h he ollowing s a emen : 'E en mo e economic powe is concen a ed in ewe hands. And many mo e companies, s e ched by he ecession, a e ipe o acquisi ion.' Resea ch on me ge s and acquisi ions (Rockwell, 1968; Wallum, 1980; Jacobs, 1984; Swain, 1985; Fa an , 1970; Ke ching, 1967; Rawlinson, 1983) has shown ha despi e sound economic, inancial, ma ke ing and s a egic mo i a ion o he acquisi ion, many ail o mee he expec a ions o he acquisi o s. Nume ous easons ha e been sugges ed o he ailu e o co po a e ma iages o achie e expec a ions. Lipwo h (1975) in an unpublished epo . men ions ha some o he easons a e he ailu e o elease syne gy, inadequa e inancial e u ns because o excessi e pu chase conside a ion, size misma ch, di e en cul u es, di e en s ages o g ow h, lack o knowledge o he acqui ed company's business and indus y, inadequa e p e and/o pos acquisi ion planning, a change in he economic en i onmen o ma ke , lack o s a egic i , mis-e alua ion o he company's managemen , e c. The imposi ion o sophis ica ed con ol sys ems on he small acqui ed company is conside ed by some esea che s o be one o he majo easons o he ailu e o acquisi ions o his na u e (Jones, 1980 and 1986b; Rawlinson, 1983; Ki ching, 1967). Jones (1980) indica es ha an impo an ac o , which ends o be igno ed by mos w i e s, is he abili y and willingness o managemen and s a on bo h sides o modi y hei planning and con ol sys ems. This enables hem o co-o dina e he di e en ia ion o unc ions and o p o ide app op ia e da a o making decisions and o ope a ional con ol. He goes on o sugges ha he ex en o he modi ica ion o planning and con ol sys ems may con ibu e o he success o ailu e o some acquisi ions. Changes in con ol sys ems a e likely o ex end h oughou he en e p ise because he sys ems hemsel es a e wo en in o he ab ic and philosophy o he conce n and hei e ec s may no be neu al. The impo ance o con ol sys ems is con i med by Ki ching's (1967) s udy in which a majo inding is ha he na u e o epo ing ela ionships se up be ween pa en and acqui ed companies, along wi h he esponsibili ies and con ol sys ems es ablished, is a dominan in luence on hei success o ailu e. As companies g ow in size and complexi y, so he p oblems o in eg a ion inc ease. Law ence and Lo sch (1976) belie e ha sophis ica ed con ols a e powe ul in eg a i e de ices, i.e. hey u nish no ms o pe o mance and by en o cing s anda ds, make co- o dina ion easie be ween in e dependen unc ions such as manu ac u ing and ma ke ing. Du ing he acquisi ion p ocess, he mo e unc ions ha change o need o become in eg a ed, he mo e complex he acquisi ion becomes. Jones (1986b) uses he model shown in Figu e 1 o illus a e he p og essi e complexi y which occu s as mo e unc ions (and hus mo e con ol sys ems) need o be in eg a ed. The leas complex acquisi ion is he one unde aken < inancial easons wi h no in en ion o change he 114 ,----------------,. HIGH NOIIZOIIAL ACOUISIIIOIS - COIIPLEIE A8SORPIIOI HORIZOIIAL ACOUISIIIOI - OVERLAPPIIG 111U ACIURll6 2 VERIICAL ACOUISIIIOI ~ i :;; ~ ~ 1---1'~"'------ ~ 1------..1' llAICIAL COIIRDL llAICIAL CONIROL UICIIOIAL ACIIVIIY CHAIGE F1gu e 1 Deg ee o complexi y "' ~ ~ ~ ~ . DEGREE O .. INIEGRA IIVE ~ CONPLEXI lY . ~ ~ ; ~ LOV pa e n o manu ac u ing, dis ibu ion o ma ke ing. He e, con onni y wi h he inancial con ols should be es ic ed o cen alised cash managemen and he alloca ion o inancial esou ces. The acqui ed company should be encou aged o con inue o use i s own ope a ional p ac ices and managemen s yle. This is app op ia e o conglome a e acquisi ions. Complexi y inc eases when b inging oge he o e lapping p oduc anges and ma ke s. Some o he p oduc s o ma ke s may be su icien ly di e en o me i wo sales o ces, whils o he s equi e a ionalisa ion o esou ces. I manu ac u ing, ma ke - ing, dis ibu ion and inancial changes ha e o be made simul aneously, he complexi y o in eg a ion in ensi ies g ea ly. This is one a ea whe e easy assump ions abou he elease o syne gy h ough he acquisi ion ou e should be ca e ully a oided. The con ol sys ems, which ac as co-o dina ing mechanisms o he di e en unc ions, will ha e o change. This p esen s p oblems as o he deg ee o change and how he change is managed. In eg a ing he con ol sys ems Lowe (1971) desc ibes a con ol sys em as a sys em o o ganisa ional in onna ion seeking and ga he ing, ac- coun abili y and eedback, designed o ensu e ha he en e p ise adap s o changes in i s subs an ial en i on- menL Also, he wo k beha iou o i s employees is measu ed by e e ence o a se o ope a ional sub-goals (which con onn wi h o e all objec i es) so ha he disc epancy be ween he wo can be econciled and co - ec ed. F om an o ganisa ional pe spec i e, he Budge - a y Planning and Con ol Sys em p obably onns he mos common inancial planning and con ol sys em. The budge ing p ocess, once comple ed, becomes a plan o ac ion o he en i e o ganisa ion and mus he e o e e lec he co-o dina ed e o s o all componen s o he o ganis~ ion. Handled wisely, budge s ac as a powe ul con olling and co-o dina ing de ice; handled badly, hey can des oy mo i a ion and cause apa hy and alien- a ion. S.A .Tydslc .Bed y sl.1990,21(4) Al hough li le has been w i en on budge a y con ol sys ems in small companies, Viscione (1984); Chu chill (1984); Edmunds (1979); Chu chill and Lewis (1983), con end ha he small company owne /manage sees less need o onnalised sys ems which a e pe cei ed o de- ac om lexibili y and c ea i i y and o consume limi ed esou ces. App oaches o in eg a ion The ques ion o how companies should bes in eg a e and handle managemen con ol sys ems a e a me ge o acquisi ion has led o wo dis inc iews. One iew suppo ed by Wallum (1980); Caulkin (1975); Ha ey and Newga den (1969); Sea by (1969); Leigh on and Todd (1969) sugges s he immedia e imposi ion o he acqui ing company's budge a y planning and con ol sys em in o de o ensu e ha he pa en company does no lose con ol o he key ope a ional a iables, especially in he pe iod o apid g ow h which usually ollows a ans usion o capi al and managemen assis ance. In con as , o he au ho s, no ably, Pea son (1978); Jones (1980) and (1986b); Le inson (1970); Mullins (1983); O ley (1987); Campbell (1985); Caplan (1971), con end ha a mo e cau ious and pa icipa o y app oach should be in es iga ed. The immedia e o has y imposi ion o a sys em, pa icula ly an inapp op ia e sys em, could lead o s ong nega i e eac ion on he pa o he managemen and employees o he acqui ed company. The nega i e e ec s on mo ale and mo i a ion could a ou weigh he bene i s ha migh be gained om imp o ed ope a ional con ol. They gene ally a gue ha i he change is o be success ully e ec ed, he e mus be ecogni ion o he di e en cul u es and s uc u es and he de elopmen o con ol and epo ing sys ems app op ia e o each. These should also be in oduced in such a way as o minimise esis ance o he change. Lawle (1976) suppo s hese indings and gene ally concludes ha he imposi ion o con ol sys ems o en p oduces beha iou ha is dys unc ional, esul ing in igid bu eauc a ic beha iou , esis ance and p oduc ion o in alid in onna ion. The e ec i e in eg a ion o he managemen con ol sys ems o acqui ed companies hen becomes a c i ical issue o balance he need o gaining adequa e con ol on he one hand, and sus aining mo i a ion and momen um on he o he . Jones (1986b) sugges s ha once he legal and adminis a i e onnali ies o he acquisi ion ha e been ollowed, a possible sequence o achie e in eg a ion may be: 1. Decide upon and communica e ini ial epo ing e- la ionships. 2. Achie e con ol o c i ical ac o s. 3. Re iew he esou ces o he acqui ed company. 4. De ine co po a e objec i es and de elop s a egic plans. Howell (1970) suppo s his s ep by sugges ing ha he s a egic plans should ocus on co po a e objec i es ela i e o he acquisi ion p ocess. In o he wo ds, cla i ying wha he company wan s o S.A J.Bus.Mgm 1990,21(4) accomplish. 5. De elop a e ised o ganisa ional s uc u e. Howell (1970) adds o his app oach by u he sugges ing a pe iodic o mal epo and ace- o- ace e alua ion p ocess o de e mine p og ess agains plan and o de e mine he need o co ec i e ac ion o a change o he epo ing p ocedu e. Cu en esea ch ques ions Wi h he abo e in o ma ion p o iding a heo e ical amewo k. i was decided o in es iga e how la ge Sou h A ican co po a ions in eg a ed hei budge a y con ol sys ems in o smalle companies acqui ed by hem. Speci ically, he esea ch was designed o answe he ollowing ques ions: 1. Do local acqui ing companies ha e a o mal acquisi ion policy? 2. A e he budge a y con ol sys ems in smalle acqui ed companies unsophis ica ed in compa ison o hose in la ge acqui ing companies? 3. Do acqui ing companies ha e a o mal policy wi h espec o he in eg a ion o budge a y con ol sys ems? 4. I a o mal policy o in eg a ion exis s, wha we e he speci ic goals o his policy. 5. Wha speci ic c i e ia do acqumng companies conside in he implemen a ion o hei acquisi ion policy? 6. Wha p oblems a ise in he acqui ing and acqui ed companies as a esul o he in eg a ion and how a e hese o e come? 7. Do acqui ing companies ha e a s anda dised ap- p oach wi h ega d o he in eg a ion o he budge a y con ol sys em? 8. Can a s anda dised app oach conce ning he in- eg a ion be applied o acquisi ions in gene al? Me hodology adop ed Fi e la ge acquisi ion-in ensi e Sou h A ican co po - a ions lis ed on he Johannesbu g S ock Exchange we e selec ed o he s udy, and a ecen ho izon al o e ical in eg a ion acquisi ion by a la ge company wi hin each o he i e co po a ions was chosen o in ensi e analysis. Fo ease o e e ence, he i e ma ched pai s o acqui ing and acqui ed companies we e designa ed 'A' h ough 'E'. Two o he co po a ions a e lis ed in he indus ial sec o and one each in he elec onics, building and con- s uc ion, and pape and packaging sec o s. In addi ion, he p e ious owne /chie execu i e o ice o inancial di ec o o each o he i e acqui ed companies was also in e iewed. This was done o ob ain a balanced iewpoin on how hey hough he acqui ing company should go abou in eg a ing he di e en budge a y con ol sys ems, and o highligh any p oblems o us a ions hey encoun e ed du ing he in eg a ion p ocess. The acqui ing and he acqui ed companies a e all in ol ed in manu ac u ing ac i i ies. Manu ac u ing companies we e chosen as con ol sys ems, and especially he budge a y con ol sys ems, a e an essen ial 115 con olling and co-o dina ing mechanism in hese companies. They a e needed o moni o he alue added o p oduc ion cos s and o co-o dina e planning be ween he sales and p oduc ion unc ions. The c i e ia ha he small acqui ed manu ac u ing company had o mee be o e being selec ed we e: - u no e a he da e o he acquisi ion mus ha e been less han eigh million and; - he acqui ed company mus ha e con inued o ope a e om i s exis ing p emises; - he acqui ed company's sales mus ha e been less han 10% o he pa en company's sales be o e he acquisi ion; - he acquisi ion mus ha e aken place wi hin he p e ious ou yea s. The c i e ia ha he esponden s in he acqui ing companies had o mee be o e being in e iewed we e: - hey mus ha e had p e ious expe ience wi h acquis- i ions; - hey mus ha e been ac i ely in ol ed in he e al- ua ion, nego ia ions and implemen a ion o he ac- quisi ion s udied in he esea ch. While esponden s in he acqui ed companies mus ha e: - been in ol ed in he nego ia ions; -con inued managing he company a e he acquis- i ion. A semi-s uc u ed ques ionnai e based on he indings o p e ious esea ch in he a ea, as ou lined in he in oduc ion o his a icle, se ed as an agenda du ing he one and a hal o wo hou in e iews. Analys s o he indings Gi en he small numbe o ho izon al and e ical in eg a ion acquisi ions su eyed, cau ion mus be exp essed in e ms o he gene alisa ion o he indings. They do howe e p o ide some use ul insigh s and guidelines ha can be applied in acquisi ions o a simila na u e. An analysis o he esponses o he eigh p e- es ablished esea ch ques ions e ealed he ollowing: 1. Do acqui ing companies ha e a o mal acquisi ion policy? All i e acqui ing companies su eyed had an acquisi ion policy, al hough only one company's policy (Company A) was o mally documen ed. TI1e acquisi ion eam in he emaining ou companies all ended o ollow he same p ocedu es which had been modi ied h ough expe ience. Fou o he i e acqui ing companies ini ially iden i ied he need o an acquisi ion. Once he need had been iden i ied, hey sea ched o an app op ia e acquisi ion. Only one o hese ou companies (Company A) had se pa ame e s p io o he sea ch and po en ial acquisi ion had o mee hese pa ame e s be o e he company p oceeded The i h company (Company D) did no necessa ily plan o , o seek ou , an acquisi ion. I an oppo uni y a ose, his company would hen de e mine whe he i was wo hwhile p o- ceeding. 116 All i e companies hen did an e alua ion be o e he nego ia ions s a ed. Once he ne~o ia ions we~e concluded, he acquisi ion was hen implemen ed m acco dance wi h he i e companies' policies. Fou companies moni o ed he pe o mance he ea e , bu only one company (Company A) compa ed he ac ual esul s agains he o ecas ed esul s. 2. A e he budge a y conl ol sys ems in small companies unsophis ica ed in compa ison wi h hose in la ge companies? In o de o assess his ques ion a simple poin sys em was de ised. By de ini ion o he esea che s, he budge a y con ol sys ems we e classi ied as ollows: O - 5 poin s -unsophis ica ed 6 - 10 poin s - medium le el o sophis ica ion 11 - 14 poin s -sophis ica ed The ou come o he analysis o his ques ion a e ou lined in Table 1. Table 1 also con ains some ad- di ional use ul in o ma ion on u no e and age o he acqui ed companies. Whe e he acqui ed company is small and has been in exis ence o a ela i ely sho pe iod (less han i e yea s), he con ol sys em, and especially he budge a y con ol sys ems a e no well de eloped. The company is usually small enough o he owne o con ol all he ac i i ies and emphasis is placed on moni o ing he bank balance. In h ee ou o he i e acqui ed companies su eyed, budge ing was done wi h he assis ance o he ex e nal audi o s. Budge ing ended o be basic and was used mainly o planning pu poses. Whe e he budge a y con ol sys em was mo e sophis ica ed (Acqui ed Company B), i was ound ha he o iginal owne had an accoun ing backg ound and had ensu ed he in o- duc ion o sophis ica ed sys ems. As was expec ed in he case o all i e acqui ing companies, hei budge a y con ol sys ems a e classi ied as sophis ica ed, whe e budge ing is used o co- o dina ion, con ol and pe o mance e alua ion pu - poses. 3. Do acqui ing companies ha e a policy wi h espec o he in eg a ion o budge a y con ol sys ems? In Table 2 a summa ised ou come o he indings ela ing o his ques ion is ep esen ed. The esponse o ques ions ela ing o his a ea o he esea ch indica ed ha all he selec ed acqui ing Table 1 Classi ica ion o budge a y con ol sys ems Acqui ing/acqui ed company lame A B C D E lllmo e pe ONUlnl -acqui ed co. (Rm.) 2 8 6 3 6 yean in exis ence p io o acquisi ion 3 15 6 4 s poin s sco ed -acqui ing canpanie1 14 14 14 14 14 poin s sco ed - acqui ed companies 11 s 3 S .A .Tydsk .Bed y sl.1990,21(4) companies did ha e a policy wi h espec o he in eg a ion o he budge a y con ol sys ems. In ou ou o he i e acqui ing companies selec ed, he policy was no documen ed, bu he same app oach was no mally applied o all acquisi ions. Gene ally, he policy depended on whe he he acqui ing co po a ions had a decen alised o cen alised managemen philosophy. In he case whe e a decen alised co po a e philosophy was pu sued, he acqui ing company (Company A in Table 2) e alua ed he exis ing con ol sys ems du ing he nego ia ion s age. I hese sys ems we e ound o mee he acqui ing company's equi emen s, hey we e gene ally le alone. Mino modi ica ions we e made only o ensu e ha essen ial in o ma ion was p oduced in he equi ed o ma . Compliance wi h he epo ing ime- able es ablished by he acqui ing company was equi ed. I he con ol sys ems we e ound o be inadequa e, esou ces we e immedia ely made a ailable o assis in he implemen a ion o sys ems which would mee he needs o bo h he acqui ing and he acqui ed companies. In he la e case, whe e a cen alised co po a e policy was adop ed, he acqui ing companies (Companies C, D and E in Table 2) immedia ely imposed hei own budge a y con ol sys em on o he acqui ed company. The p e ious owne s and he s a had no pa icipa ion in his decision and had o accep he policy. In some cases he p e ious owne s o he acqui ed company we e in o med abou his policy du ing he nego ia ions; in o he cases hey we e no old ha he acqui ing company's con ol sys em would be imposed upon hem. The con ol sys ems we e imposed e en i he acqui ed company's con ol sys em may ha e been app op ia e and adequa e. In all h ee acqui ed companies (Companies C, D and E) a new posi ion o Financial Manage was c ea ed and illed immedia ely a e he acquisi ion ook place. Gene ally, assis ance was gi en o implemen he new con ol sys ems and s a om he acqui ing company could spend up o six mon hs in he acqui ed company. T aining was gi en and he inancial pe son om he acqui ing company con inued o moni o he con ol sys ems and he pe o mance o he small company. . F om he analysis o in o ma ion ela ing o his ques ion, i was ound ha acqui ing Company B did no impose i s budge a y sys em on acqui ed Company B as he con ol sys ems we e conside ed o be adequa e. 4. Wha we e he speci ic goals o he acqui ing companies' in eg a ion policy? The indings on he esea ch ela ing o his ques i~n e ealed h ee consis an goals, namely, (a) o gam mancial con ol o e he acqui ed company; (b) o be able o ely on he in o ma ion coming om he acqui ed company; and (c) o ensu e compliance wi h he g oup's epo ing o ma . (No applicable in he case o Company B, as he sys ems we e no imposed.) This was done o enable he managemen o he acqui ing company o manage he acqui ed company om hei own o ices. They also belie ed i enabled hem o make be e decisions ega ding he u u e S.A J.Bus.Mgm .1990,21(4) Table 2 Deg ee and p ocess o in eg a ion Acqui ing/acqui ed canpanies Issue A B C D E acqui ing companies budge a y C<lll ol sys ems imposed yes no yes yes yes imposed immedia ely no n/a yes yes yes in eg a ion policy changed du ing he pas ou yea s yes no no no no di ec ion o he acqui ed company as a as consolida ion was conce ned and o ensu e ha ac ion could be aken o emedy any a iances, i applicable. 5. Wha speci ic c i e ia do acqui ing companies conside in he implemen a ion o hei acquisi ion policy? The speci ic c i e ia which eme ged in de e mining whe he he budge a y con ol sys ems we e in eg a ed o no , we e ound o be: -whe he he acqui ing company had a cen alised o decen alised managemen philosophy; - he adequacy o he exis ing con ol sys ems; - he a ailabili y and expe ience o he accoun ing pe sonnel in he acqui ed company; - he a ailabili y o inancial people in he acqui ing company o assis in he implemen a ion o he new con ol sys ems; and - he adequacy o any compu e ha dwa e o so wa e in he acqui ed i ms. 6. Wha p oblems a ise in he acqui ing and acqui ed companies as a esul o he in eg a ion and how a e hese o e come? The g ea es p oblem encoun e ed by he selec ed acqui ing companies was pe cei ed as changing he a i ude o he p e ious owne s and s a o budge a y con ol sys ems. Excep o he ma ched pai 'B', he e we e majo di e ences in he a i ude o budge ing be ween he acqui ing and acqui ed companies. All he acqui ing companies used budge ing mainly o co- o dina ion and con ol pu poses, whe eas acqui ed companies A, C, D and E used budge ing only as a guide wi h emphasis placed on managing he daily bank balance - his was conside ed mo e impo an han he con ol ad an age o budge s. Unless he changes made me he needs o he acqui ed companies, and hese bene i s we e unde s ood and accep ed by he p e ious owne s and s a o he acqui ed company, he new con ol sys ems we e gene ally esis ed. This p oblem was o e come by he appoin men o a inancial manage and p essu e exe ed upon his posi ion o ensu e ha he imposed accoun ing and budge a y sys ems we e adhe ed o. The g ea es p oblem ha he p e ious owne s o acqui ed companies A, C, D & E pe cei ed, was he c ea ion o addi ional pape wo k. This mean ha hey we e no able o spend su icien ime managing hei businesses and i oning ou any p oblems ha a ose. 117 Wi h espec o ma ched Companies 'A', he non- a ailabili y o esou ces o second o acqui ed Company . A, c ea ed p oblems o no being able o unde s and he business and o con ol i e ec i ely. In eg a ion only occu ed du ing he hi d yea a e acquisi ion when accep able accoun ing and budge a y con ol sys ems we e implemen ed which assis ed in elimina ing unp o i able lines and allowed he business o concen a e on hose p oduc s wi h he g ea es ma gins. Following is a summa y o he addi ional p oblems ha we e expe ienced by he acqui ed companies: The changes o he con ol sys ems we e aimed a mee ing he needs o he acqui ing company and we e no mally inancial and no ope a ional in na u e. -No conside a ion was aken o he la ge adjus men s ha we e needed o be made by he p e ious owne s and s a o he acqui ed companies. Th ee p e ious owne s indica ed ha he con ol sys ems should be phased in o e a numbe o yea s and should no be immedia ely imposed. -Addi ional pape wo k was c ea ed and he p e ious owne s did no ha e he necessa y ime o p ope ly manage he acqui ed company. -The acqui ed company no mally had o employ addi ional s a o implemen and moni o he new sys ems. These sys ems we e no eally bene icial because o he small company's size. The s a suddenly had o do all he budge ing and accoun ing, whe eas his was no mally done by he ex e nal audi o s. The lexibili y and he en ep eneu ial abili y o he p e ious owne s we e cu ailed by he imposi ion o he new con ol sys ems. This caused us a ion. 7. Did he acqui ing companies ha e a s anda dised ap- p oach wi h ega d o he in eg a ion o he budge a y con ol sys em? The i e acqui ing companies included in his s udy indica ed ha hey did ha e a s anda dised app oach o he in eg a ion o he budge a y con ol p ocess. Acqui - ing Company A, a e he pa icula acquisi ion in ques - ion, indica ed ha a change in policy was called o which esul ed in he up on e alua ion o he con ol sys ems o any po en ial acquisi ion. I also now ensu ed ha he e we e adequa e human esou ces a ailable o assis in he implemen a ion o con ol sys ems, i applic- able. The app oach o he emaining ou acqui ing com- panies has no changed and is pe cei ed by hem as s ill being app op ia e. 8. Can a s anda dised app oach conce ning he in- eg a ion o con ol sys ems be applied o acquisi ions in gene al? O he companies included in he esea ch one ga e an unquali ied 'yes' (Company A); one a 'no' answe (Company C); and he emaining h ee companies (Companies B, D & E) a quali ied 'yes' answe o his ques ion. F om he de ailed answe s gained o his and o he ques ions posed du ing he exe cise, he esea che s a e 118 o he op1mon ha a s anda dised app oach o he in eg a ion o he budge a y con ol sys ems upon he acquisi ion o a small company can be employed. The ecommended app oach which conside s he needs and po en ial p oblems o bo h he acqui ing and acqui ed companies, is ou lined below. The app oach ecommended a emp s o balance he need o immedia e con ol on he one hand and he main enance o mo i a ion on he o he and includes he ollowing i al s eps: a) e alua e he con ol sys ems and he budge a y con ol sys ems be o e he acquisi ion is inalised; b) discuss any changes o he con ol sys ems du ing he negouauons and ob ain he p e ious owne 's accep ance o he decision made; c) i he con ol sys ems in he acqui ed company a e conside ed inadequa e by he acqui ing company, hen: -ensu e ha he changes made mee he needs o bo h he acqui ed company and he acqui ing company -in ol e he owne in de e mining he pe iod o ime du ing which he changes will be made -do no implemen all he changes immedia ely as he owne and s a o he small company need ime o adjus o he new 'cul u e' -ensu e ha he e a e adequa e human esou ces in bo h he acqui ing and he acqui ed companies o implemen he new con ol sys ems - aining mus be gi en and cou ses, explaining he backg ound o and he philosophy o he need o p ope budge ing, should be a ended by key pe - sonnel om he acqui ed company -ini ially, ensu e ha key in o ma ion is budge ed and epo ed upon so ha he managemen o he acqui ing company know wha is happening - on an annual basis, usually be o e he budge ing exe cise s a s, allow he p e ious owne o he acqui ed company o discuss any p oblems, ecom- mended changes e c. - ake heed o hese sugges ions as hey a e impo an o he p e ious owne and may be a cause o nega i e mo i a ion o us a ion; implemen hese ecommenda ions i applicable - y and minimise he mon hly epo ing back (agains budge ) so ha he p e ious owne spends less ime on pape wo k. This will also enable him o spend mo e ime p oduc i ely managing he acqui ed company; and d) i he exis ing con ol sys ems a e conside ed o be adequa e in e ms o he acqui ing company's equi emen s, hen: -do no ampe wi h he exis ing con ol sys ems -howe e , ensu e ha key in o ma ion is p o ided mon hly in he o ma equi ed by he acqui ing company ( his will allow o easie consolida ion) -ensu e ha he smalle acqui ed company has he esou ces (bo h human and compu e ) o p o ide he key in o ma ion wi hin he deadlines imposed - i applicable, assis he p e ious owne in adap ing o he 'cul u e' o mon hly o qua e ly Boa d S.A .Tydsk .Bed y sl.1990,21(4) e iews and he p esen a ion o he budge o senio managemen -conside any ecommenda ions ha he p e ious owne makes; his ecommenda ions may con ain insigh s ha could be o g ea alue because o his in ima e knowledge o he business. Re e ences Business Week. 1978. A e he me ge - keeping key manage s on he eam. Bus. Week, Oc obe 30. Campbell, I.J. 1985. 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