Office of the CFO – enabling successful transactions, business continuity and a summer holiday?

In recent Done Deal editions we have covered the importance of communication, both internal and external in delivering successful M&A. Today we look at a broader challenge businesses face, bandwidth. The simple fact is transactions are a massive time sink for finance teams which have become lean in nature and are faced with planning for downturns, protecting margin in rising inflationary and interest rate environments, and increasing performance visibility (details of which can be found in FTI’s 2023 Global CFO Survey).

In our corporate finance business we are now seeing clients starting to look at M&A with market factors more stable than they have been for some time. 

But moving beyond due diligence supporting the strategic rationale and synergy estimates, are the operational challenges that can arise even as part of the most robustly planned M&A processes.  The demands on a seller’s resources – from the initial market offering, to quality of earnings exercises, and through to transaction closing – are often under estimated.  Unanticipated business impacts can strain teams, distract leadership, lead to delayed internal reporting and lower visibility on performance metrics – all in the face of rising staff turnover which we covered in this piece around people and cultural implications during the M&A process.  There is a reason why whilst deals may deliver on cost synergies, performance suffers as the underlying business is overwhelmed by the deal process.

Frequently companies are appointing experienced business professionals in interims roles to drive the key transaction and integration workstreams across 1) Stakeholder management; 2) Diligence Execution; and 3) Operational Support. The interim resource acts as an experienced objective leader throughout the M&A process, allowing the management team to focus on day-to-day operations and longer-term strategy. The interim resource further acts as a credible communicator with and manager of external stakeholders, including lenders, legal advisors, bankers, suppliers and potential M&A partners.  In short, this allows management teams to manage and be involved in the process, but not at the expense of the day to day or, at this time of year, the family holiday!

Engaging sell-side support in the form of interim resources can help to mitigate the stress and uncertainty which can arise during M&A efforts, while ensuring a smooth transaction process and maximising shareholder value.  The most common forms of interim resourcing we provide in these situations are:

1. Stakeholder Management: Business leaders have day jobs – leading their businesses.  While their strategic insight is always a key component of M&A transactions, the process requires significant attention.  Dedicated interim M&A managers fill the important role of coordinating with both buy- and sell-side advisors, coordinating internal diligence efforts, and meeting key milestones – giving crucial time back to senior leaders to fulfill their duties to the company. 
2. Tactical M&A Diligence Execution: The level of involvement by company resources in financial analysis, scenario planning, and policy/ process documentation is often underestimated by sellers.  Although transaction advisors provide valuable guidance and market comparisons, they often do not have the level of knowledge to generate the detailed data and input necessary to meet overall diligence requests.  Engaging with seasoned sell-side interim resources who have both filled operational company-side roles and participated in prior M&A efforts can alleviate much of the stress that otherwise fall to in-house teams. 
3. Operational Support: While turnover is common within any organisation, the announcement of an M&A deal can create unease with staff, particularly at the manager-level and below – provoking them to explore other opportunities.  The loss of these individuals can be disruptive as they tend to execute the day-to-day operations of the business, particularly if the company has already embarked on a lean operating model in preparation for a sale.  Hiring freezes associated with the transaction or difficulty recruiting candidates due to concerns around the future of their roles post-closing can exacerbate the situation.  Interim support can be the effective bridge as transactions are concluded.

Buy-side M&A resources can also play a critical role in the evaluation of target operations and processes, transformation programme design, and the synergy realisation roadmap.  The level of coordination required to affect post-transaction efforts requires several months of effort, and operational advisors and interim transformation leaders can help to keep momentum following a close without having to take on longterm headcount which will later not be needed. 

So whilst proper planning and active communication are cornerstones of any successful M&A transaction, an overstretched or under-skilled internal structure can undermine the best laid out approaches and ensure that 1+1 is no more than 1..  While unforeseen events can complicate any situation, engaging interim support can help to ensure business continuity and provide critical resources to the teams responsible for this delivery.  We’ve been here before, inside businesses across the US and EMEA, working alongside management teams to deliver successful transactions, and, as we move into the holiday season and the prospect of 18 hour days whilst trying to maintain some semblance of family life is looking increasingly unlikely, we are here to help!

To learn more about our interim CFO offering please learn more here or contact Thomas Grigg and Joseph Sciarrino. For futher information on how we can support on M&A communications please contact Alex Le May.