CFOs are uniquely positioned to contribute significantly during the M&A process and, ultimately, influence the success of the deal. From the identification of a target through to post-close execution, CFOs typically monitor shareholder value before, during and after a deal.
But while numerous reports have identified many of the reasons for disappointing results, few have identified solutions. With Servest having garnered much success in the M&A world, we talked with CFO Phil Morris to find out the skills finance teams would need and what curveballs could be thrown their way.
(1) First of all, what role would the CFO play in the M&A process?
The M&A process can considerably vary depending on the nature of the acquisition in question. The CFO’s role can, therefore, fluctuate between heavy to light involvement. There’s not a one-size-fits-all model for each and every M&A but, for the most part, the process includes assessing the funding landscape, conducting due diligence investigations, negotiating with all relevant stakeholders and establishing, nurturing and maintaining an open dialogue between parties.
A CFO’s main responsibility is ensuring there is adequate funding available to deliver the acquisition in the first instance. The due diligence enquiries, concerning the financial, commercial and cultural aspects of a business, are a very important part of the process. CFOs have to work closely with their advisers to ensure they know everything about the business they’re acquiring, so there are no doubts that it is a suitable fit and reflects the necessary quality.
Once the decision has been made to buy the business, there follows a mountain of legal paperwork to go through with a fine-tooth comb. At that point, further negotiation may become necessary before the Sale and Purchase Agreement (SPA) is finalised. Throughout the process, which on average lasts around six months, the CFO tends to be involved in lots of meetings and discussions, to make sure everyone is on board with the decision.
Read more about M&A deals:
- Essential tips to execute an M&A deal with a manufacturing firm
- Asian businesses offer strong M&A opportunities for British companies
- How to avoid an M&A nightmare
(2) In your experience, what are the top skills required of CFOs to successfully navigate M&A activity?
In terms of hard skills, CFOs need broad financial knowledge and experience in M&A processes. They also should possess legal acumen, as well as a keen eye for detail, because they’re responsible for checking through contracts and validating the information contained within the abundance of paperwork that will accompany any M&A. Project management skills are also important, as CFOs will have to look after multiple streams throughout the process.
In terms of softer skills, patience in M&A is most definitely a virtue because it can be a long and arduous process. CFOs also need an element of tenacity and determination to drive the best outcome for the business. Part of this requires exemplary negotiation and people skills, as well as the ability to adapt and make quick decisions to maintain a smooth process.
(3) How did you acquire these skills?
I acquired these skills over years and years of practise! My background is in accounting and corporate finance and, when I moved into the commercial world from practice, my focus was purely on M&A. I believe that sort of grounding is essential; you really do need a solid foundation before you embark on such projects, because you move from advising on others investments to spending your own money! Here at Servest, we have high quality leadership development courses on offer, which go some way to helping acquire and enhance those hard and soft skills. But, otherwise, it really is a case of learning as you go and applying what you know.
Read on to find out how best to mitigate risk.
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