Mergers and Acquisitions are some of the best strategies companies employ to scale or diversify their businesses. M&As can take various forms, sizes, shapes, and goals. Regarding the planning and managing sides of an M&A, CFOs are responsible for leading efforts toward a successful deal, as well as taking on the role to drive ESG. So how can you ensure that will happen?
Simone Grimes, Chief Financial Officer at Acadia Insurance, joins the next episode of the CFO Weekly podcast to discuss challenges associated with M&A integration, how CFOs can manage businesses across multiple M&A stages, and the importance of ESG initiatives.
In this episode, we discuss what role CFOs play in an M&A, post-acquisition integration challenges, how CFOs should prepare themselves for M&As, and how businesses should square the cost-benefit equation of ESG, among many other interesting topics.
The CFO's Strategic Role in an M&A & ESG
A traditional horizontal M&A implies a larger company acquiring a smaller one that operates in the same space. A vertical transaction is when a larger company acquires various parts and pieces along its value chain. An M&A conglomerate is when a business seeks to diversify its portfolio by acquiring a company out of its industry. In all cases, a CFO should start preparing and planning the M&A strategy early, like setting up the tax strategy and the communication plan with stakeholders and consider possible issues along the journey.
“For an organization that wants to go out to auction or identify buyers, I would say it's very important to engage in a preliminary process because the last thing you want to do is get halfway through the transaction and realize that some big red flags won't allow the other party to close the deal”
Post-Acquisition Integration Challenges
During the acquisition process, the buyer and seller teams should come together to map out the integration procedure to allow both companies to merge successfully. To understand if the plan works, analyze the first 100 days post-integration period to see if all operations are aligned and if people can perform at the same level before the acquisition. Focus on financial reporting and contractual provisions to retain key personnel and start melding the culture.
“Culture eats strategy for breakfast”
Preparing for an M&A
As a CFO, don't wait too long. Start planning early, focus on the tax strategy and line up your deal partners. Furthermore, communicate with all the people across the value chain.
“I think people shoot themselves in the foot sometimes by trying to overcomplicate transactions when on the buyer side, they just want to get the deal done and move on”
Why Should Businesses Focus on the Role of ESG?
The role of companies has traditionally been to serve stockholders. But people require businesses to expand that role to also serve stakeholders, which can be more broadly defined as customers, employees, and wider society.
“As a society, the determination has been made that companies have to serve a broader set of stakeholders. That part of the privilege of doing business and making enormous profits will be that something has to be given back to the planet and the people”
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