It should come as no surprise in the current economic moment that many businesses are cautious about making big decisions. However, despite the looming possibility of a recession, merger and acquisition (M&A) activity remains strong. There have already been $63 billion worth of M&A transactions in North America alone, thanks to rising stocks and steadier US markets.
Few things in business are as exciting — and nerve-wracking — as an M&A transaction. In the course of a single deal, companies can go from total strangers to partners, and the role of the CFO is critical at every stage. From due diligence to integration, CFOs are responsible for ensuring that the numbers add up and that the transition is as smooth as possible.
But as most CFOs know, M&A is more than just a business transaction — it's a delicate transformation requiring a careful blend of strategic planning and execution. And once an acquisition takes place, it's not the end of the road; it's really the beginning of a new leg in the journey.
As the buyer-side CFO, you have the unique opportunity to smooth this transition and ensure that your company hits the ground running.
Below, we focus on post-acquisition steps that should be thoughtfully considered when moving forward with financial and cultural integration.
Remember Your Primary Goal
Upon acquisition, buyer-side CFOs need to take a step back and assess the acquisition goals. This may seem obvious, but with so many moving parts in the transaction, it's important to remember what your company is trying to achieve. Every acquisition has a different purpose — sometimes, it's not about buying a workforce. Sometimes you're buying formulations, intellectual property or buying out a competitor. Why did your company want to acquire this particular business? Was it for the customer base? The ability to enter a new market? Which relationships does the other company have that are of most value to you?
Only after you answer these questions can you ensure that every decision you make is purposeful and aligned with the bigger picture.
Consider Your Talent
Talent management is one of the most critical challenges facing organizations that have recently acquired a new company. In particular, they must focus on retaining essential talent in the company's operations and managing duplicate roles or teams.
After an acquisition, it's common for employees to feel uncertain about their future. Company leaders — such as the CFO — must address these concerns to retain talent and help employees feel needed, appreciated and motivated. One way to do this is by providing praise and attention. Recognizing employees for their hard work and dedication can go a long way in making them feel valued. Companies should also provide opportunities for employees who joined during an acquisition to take on more responsibility and offer additional training or development opportunities.
Financial incentives are also helpful to encourage highly-needed employees to stay after an acquisition. For example, consider a retention bonus. Every month an employee remains with the company post-transaction, they receive a bonus. After all, you don't want everyone staying for a month and then bailing ship.
To avoid duplication of roles or teams, you may also need to consider which positions or functions are essential to the new company and which can be consolidated with existing positions or eliminated.
Synergize Your Cultures
A company's culture is like its fingerprint — unique and defined by a set of values, attitudes and beliefs that guide the company's practices. When one company acquires another, there is always the risk of a cultural clash. The acquired company's leaders and employees may resist changes to their way of doing things, even if those changes would benefit the business. To avoid this resistance and ensure a successful acquisition, aligning the two companies' cultures is critical.
The acquirer company should ask how the acquired company makes decisions, builds strategy and motivates employees. What are the seeds of value that hold this organization together? What are the workplace norms?
Unsuccessful cultural integration can lead to mismanagement, poor business decisions and even financial losses if not handled properly. However, if done well, cultural integration can positively impact the bottom line. By understanding and respecting the differences between the two cultures, new owners can create a synergy that leads to better decision-making, increased productivity and improved profitability. In short, while cultural integration can be a complex and challenging process, it can also be a powerful tool for creating value post-acquisition.
Better understanding the acquired company's cultural DNA can also help determine an appropriate transition period for the acquisition—establishing if you want to rip the bandaid off or implement a cultural and administrative grace period.
Looking at the Logistics
Before the acquisition, CFOs typically take a deep dive into identifying potential weaknesses in the acquired company's data or operations to mitigate risks and take a proactive approach. Once the acquisition is finalized, the real work begins.
Examples of areas to prioritize your focus include:
- IT & Cyber Security: CFOs must work closely with IT professionals to assess how the two companies' systems can best be integrated. The goal is to create an efficient and effective system while minimizing disruption during the transition. Additionally, CFOs must re-examine any cybersecurity or data protection vulnerabilities on the acquired company's end and address them.
- Supply Chain Logistics: Many companies are currently struggling with supply chain issues, making it even more critical that you thoroughly focus on supply chain mapping and examine potential vulnerabilities. Re-analyze the acquired company's vendor relationships and logistical exposures. Work with your supply chain leaders to come up with solutions.
- Accounting and Taxes: After an acquisition, it is crucial to understand the transaction's financial impact. By looking at the accounting and tax changes that will come into effect, you can get a clear picture of the financial implications of the deal.
By carefully planning and executing each step, as well as calling in support when needed, CFOs can help minimize potential problems during the post-acquisition process.
Please contact us if you have questions about M&A or the post-acquisition process.
Published on August 30, 2022