The success of a company’s M&A strategy is a crucial factor in determining the organization’s future direction. The CFO plays an integral part in assuring that due diligence is sound, estimates are reasonable, and the integration process moves smoothly. Here are a few tips to help your organization avoid mistakes and position for successful M&A activities.
Diligence vs. Speed
The depth of your due diligence process and the speed at which you move to close stand in direct opposition of each other. Due diligence is by far the most crucial part of the deal process; however, ensuring that it moves along without significant delay is a large part of a CFO’s job in a transaction. Every aspect of your due diligence process should be deliberate and necessary. A longer due diligence process is directly correlated with better deal outcomes. However, after a certain amount of time, there are diminishing returns on the analysis quality for each additional day spent. Stay in the trenches and make yourself keenly aware of when those diminishing returns start to come into play, then move things along.
Tax and Capital Strategy
One of the more overlooked variables in M&A transactions is not the taxes themselves but their impact on the capital strategy moving forward. It is essential to have all subject matter experts included in the earliest parts of the diligence process to ensure that strategic decisions will be timely and in-alignment with where the analysis is pointing.
Prepare for Innovation
Value will be created or destroyed based on how well integrations happen, and innovation should be at the core of every integration and transaction. Understanding how the companies will mesh moving forward takes perspective beyond what the numbers can tell you—seeing the necessary innovation and ideas that open opportunities for greater value takes creativity combined with a deep knowledge of the businesses and industry. The word agile comes up a lot when discussing innovation, particularly in the M&A world. Agility perfectly describes the mindset needed for decision-makers inside of the transaction. Understanding that new information and events can lead to a change in an integration’s anticipated direction is vital. Being prepared to act swiftly and with intent can make or break the integration process.
When evaluating the best direction for your M&A strategy, consider all your options. Your acquisition strategy can quickly become inefficient. Rapid changes in technology can make divestitures an attractive opportunity to invest in your existing organization’s growth, especially when early adoption of these technologies is a lead factor in whether or not you will match or exceed your competition.
Spreadsheets won’t cut it on the NYSE. Your finance organization needs to be enhanced to handle the rigorous reporting and other challenges incumbent upon public companies. For any company with the aspiration of going public, it is important never to get too comfortable with current systems and standards. It is (almost) never too early to begin implementing an IPO readiness checklist, ensuring that finance is well-equipped for public standards of corporate governance. Many private companies begin evaluating the readiness of their corporate governance before moving forward with a decision to go public.
Questions to consider:
- Where is M&A strategy on our priority list?
- Is our company familiar with current and upcoming technologies that support our industry?
- Are we getting the most out of our deals through rapid innovation?
- Do we have the correct SMEs in the right places, at the right time?
- Is it time to enhance our finance capabilities?
For support with any of these questions feel free to reach out to us. We are the finance and digital transformation experts many companies rely on to succeed in their industries.