Opinion

Fighting for the role of CFO: Which firm's FD do you pick after a merger?

3 min read

09 November 2015

After it came to light that Betfair's Alex Gersh would become CFO if the company's merger with Paddy Power goes through, we came across an article discussing how a merged company should pick the top finance position – and couldn't agree more.

Published in Financial Director is an article written by one Kevin Reed, who spoke with Simon Laffin, the former CFO of Safeway, about a hostile takeover.

Talking about Morrisons’ takeover of Safeway in 2004, Laffin claimed “It was an intensive programme of de-Safeway-isation. A classic example of a failed merger that did all the things wrong. Firing everybody was one of the more stupid things to do in a merger.”

Laffin added there was no point in staying anyway. However, he explained that choosing the best people for the job would end up being more profitable.

“You might compromise to provide balance later on, but you should always start with retaining the best person for the job,” Laffin said. “Frankly, if you can’t have a merger as a marriage of the best talents of the two businesses then I can’t see why you’d do it.”

This was similarly echoed by CFO recruiter Çaufla Bekbölet, who told Reed: “You have to find the balance in that top management team, and that’s sometimes a very politically charged environment.”

At the end of the day, management needed to keep the financial team that would make the most use of what the two companies had to offer. So conversations about people decisions need to be had from the very start of merger discussions, explained Suzzane Wood, head of the European finance division at Russell Reynolds.

Reed cited her as saying: “Boards commission assessments of top talent, which is where we get involved. It’s not just about putting people in jobs; we assess talent from board to senior leadership and help fill their gaps. Boards have to reimagine the next ten years: what talent do they need to have? What are the disruptive influences on their business? Do they have skills and experiences in those areas? This happens way before a deal is completed; decisions on mergers and takeovers are made by closing gaps and skills.

“Always assume your company could change shape, and your job as a business leader is to reimagine what could happen to create value, and not be frightened of that, even if a move of which you’re the architect makes your own role disappear – but it does create shareholder value. That will only look good. When you deal with big corporates, they’ve invested their equity in the company and will be seen as good leavers.

“We listen hard to everyone involved with the individuals. How they behaved…did they leave the controller to the day-to-day work? Advisers might say, ‘The finance director wasn’t around for the heavy lifting; it seemed to be the number two.’ You can’t afford to leave the detail after a deal is struck. Someone who’s hands-off…it does say a lot about you.”