How Can CFOs Support Business Growth Through an M&A

October 5, 2022 Lydia Adams

picture of skyscrapers indicating business growth through an m&a

As challenging as it sounds, M&A brings significant opportunities for business growth that most companies never have the chance to experience. CFOs have substantial responsibilities in leading successful acquisition and integration processes.

To better prepare for a potential M&A, Charles Freund, Chief Financial Officer at FLEETCOR, joins the next episode of the CFO Weekly podcast. He shares the challenges and benefits of an M&A growth strategy and the importance of ESG initiatives.

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Welcome back to CFO Weekly, where we're talking with financial leaders about how to build efficiency in their teams, create time for strategy and ultimately get results with your host Megan Weis. Let's jump right in.

Megan: Today, my guest is Charles Freund. Charles was appointed as FleetCor's chief financial officer in September of 2020 and has been with them since 2000. During his tenure with FleetCor, Charles has held numerous roles including Executive Vice President of Corporate Strategy, Executive Vice President of Global Sales, President of Emerging Markets, Senior Vice President of Corporate Strategy, Vice President of UK Card Issuing, and Vice President of Business Development. Prior to joining FleetCor, Charles was a consultant at Sibson Consulting, a member of The Segal Group. Charles, thank you so much for joining me on today's episode.

Charles Freund: Thanks for having me, Megan. Delighted to be here.

Megan: Today we're going to be discussing your career, the challenges, and benefits associated with an M&A growth strategy, and the importance of ESG initiatives. I'm really excited to learn from you so let's get started.

Charles: Great.

Megan: First and as always, let's start with you and your story and how it is that you got to where you are today.

Charles: Well, Megan, I've had a nearly 22-year journey here at FleetCor. Prior to joining FleetCor, I was a management consultant, predominantly focused in human resource issues but did some corporate development-type projects, which is where I met our current CEO, Ron Clarke, where he was the client and I was the consultant on several projects. Once Ron came to FleetCor, I quickly followed and worked with him, laid out the strategy, and where we might take the company.

I started in our corporate development group working on strategy and initial capital raising from private equity firms. Unfortunately, the business we joined was rather broken. It was about 30 million in annualized revenue and it was losing $1 million a month in operating cash flow. For the first year-and-a-half, we went to work on fixing the business, rationalizing the size of the staff, and fixing various practices around the company to make sure that we could basically keep the doors open. After a year-and-a-half of that, we got back to break even, which was great, and then we were able to actually raise some private equity money and that started our acquisition spree.

Starting in 2002 with that recapitalization, we started consolidating businesses in the United States, and I played a key role in that until about 2006 when we decided we wanted to expand internationally. I led a deal to buy a company in the UK and upon closing that, was assigned the integration task. I moved over there without my family and worked to integrate that company into FleetCor. Subsequently, we bought a couple of other companies in the UK and I then relocated my family there to run some of those businesses. That gave me my first experience as a general manager, where we both operated businesses and then continued to buy and consolidate in that market.

Meanwhile, FleetCor continued to expand and grow in other areas. I was there in the UK for about two years and then came back to help with our IPO. In 2010, FleetCor went public and my role in that project was to educate the bankers, help draft our S-1 registration document, prepare our roadshow presentations, and then actually went on the roadshow with our CEO and former CFO to basically drum up interest in FleetCor. Successful IPO; we went out at about $23 per share, and today trade north of more than $200 per share so nearly 10 times our IPO price of 12 years ago.

Post the IPO, my role shifted to what we called a president of developing markets. FleetCor had operations in Europe and North America, and the CEO said, "Whatever we can go and acquire in other places, that'll be yours to run." I was able to take our company in 2011 to Mexico, in 2012 to Brazil, and then in 2013 to Australia, and New Zealand, and acquired a few other businesses in Brazil.

I was, at that point, a group president operating our businesses all around the world, but they didn't really interrelate very, very well. I speak no Portuguese, so it made more sense to take the Brazilian business and give it to someone who could actually operate it in the local language. We took Mexico and gave that to the North American team and then Australia and New Zealand moved into the Europe team, which brought me into more of a corporate strategy role.

I wasn't necessarily running M&A but I was working side by side with our CEO to advance various strategic initiatives, mostly around sales, product development, revenue management as well as other things: IT, organizational structure, and certain partnerships that we were evaluating. Basically, anything that he felt he wanted another set of eyes on, I would get involved in.

That lasted for about three years or so, three, or four years, and then when our former CFO decided to retire in the year 2020 in the midst of COVID, Ron approached me and asked me if I would consider the CFO role. I had never really considered it in the past, but he felt it might be an interesting fit so we evaluated it, and then basically here I am, almost two years into the job here as CFO.

Megan: You've held a ton of different roles for FleetCor in lots of different areas. I'm just curious to know which one of those roles you felt taught you the most about the business.

Charles: It's a great question. I would say that business concepts ideally it was the corporate development role. Evaluating, and looking at lots of different markets, different business models, revenue models, cost structures, et cetera, gave me a real sense of business in general. However, actually running businesses here at FleetCor and getting into the details of what that takes and how to manage staff across geographies and such, was eye-opening for sure.

Different roles provided me with different tool sets, even playing corporate project manager on the IPO helped me understand investor relations and get ready for that aspect of my role as CFO in terms of learning the businesses from outside corporate development from the inside out as a president or group president of actual operations here.

Megan: You made the comment that at one point you decided to expand internationally. How did you know it was time to do that? What went into that decision?

Charles: It was a fascinating meeting. It was myself, our Head of Corporate Development and then a colleague of mine. I was a Vice President of Corporate Development at the time, and four of us sat around the CEO's conference room table. It was 2015, early 2015, and we were trying to decide, "Do we go broader in payments that stay domestic, or do we continue to focus on the Fleet Card fuel purchasing expense management area but do it internationally?"

We debated for a while and finally said, "Look, let's consider the international approach. We know how those businesses run. We understand the products. We understand the networks that are required. We have key relationships with major oil companies here domestically. We can expand those internationally. We have some systems. We understand the needs there. Let's do this in other places."

Stepping out of that meeting, my other vice president colleague was assigned to go figure out, "Which market do we go to first?" We've obviously spanned the world. Europe is a logical place. We weren't quite ready to step over into Asia. We scoured Europe, and tried to figure out, "Where's the most volume and activity? Germany. Where do we actually pretty much speak the same language? The UK."

We looked at those markets pretty hard and then decided to focus in on the UK, and found a few companies that we wanted to target. They weren't for sale but after meeting with the management teams, basically the owners multiple times, we finally got someone to say yes and closed the deal there in the fall of 2016. That was in the Midlands, in the UK. That was our first international foray.

Megan: Not that long ago.

Charles: No. We tend to move faster at FleetCor. After that, we did acquire a business in the Czech Republic, we acquired businesses in further parts of Eastern Europe. We continued to expand in Europe, doubling down in the UK multiple times. It really wasn't until 2011, post the IPO, that we decided to go beyond Europe, and North America, call it US-Canada geography.

Megan: As you look back on your 22 years at FleetCor, are there any stories that stand out in your mind as turning points?

Charles: Oh, so many as you can imagine. When I first joined, I mentioned that the company was losing money. On two separate occasions, our corporate controller and treasurer, called me personally and says, "Charles, I know we're supposed to pay you this Friday. Would it be okay if you get that next week?" His name is Steve. I said, "Steve if you promise me it's going to show up next week I'm okay with that." Twice, we had to go through that. That's how close the FleetCor was to being bankrupt and closing its doors. That was obviously a critical moment.

Raising the private equity money which allowed us then to close a couple of deals we had been planning on immediately got the ball rolling. Megan, those early deals were more what I call portfolio acquisitions. We had a core processing system. We were buying books of business of customers that would use our fuel card products and accepting merchants that would accept our fuel card products at their fueling locations. We were buying those portfolios from people who were running them like a franchise licensed operation and then bringing them onto our central systems with our central call centers and all the central operations, which provided incredible synergies.

I could buy a business at a good price from the person who is selling it, but I could operate it in a far more efficient manner, which allowed me to generate a lot of earnings. The more earnings I generate, the more value I'm creating for shareholders and such, and so we could raise more money and then keep that acquisition process flowing. Getting that first tranche of private equity money was huge for us.

For me personally, having the chance to go work internationally, and being the first employee from FleetCor to relocate abroad, you can imagine we didn't quite have the HR processes and systems in place to do that, so that was an adventure unto itself. Obviously being in a different country, learning their culture and the rules obviously of business in different places and how to engage, just really tremendous learning for me, which then helped me when I got the assignment to build our business in Latin America and in Australia and New Zealand.

All of those points, and then I'd say really for me, this role has been just transformational. Obviously, running businesses around the world is a thing. Then I came back into Strategy where I had a very, very small team of advisors and such. To come out of that and step into the global CFO role and the responsibilities that entail, the 16 direct reports that I have today all around the world and across functions, was a huge step for me, one that I'm incredibly grateful for. I continue to learn lot in the job, and I would tell you, it's probably the most fun that I've had.

Megan: Well, I can definitely see how you've been there for 22 years. It sounds like you've lived in adventure.

Charles: That's for sure. Delighted with the team. They've been incredibly instrumental in getting us this far. Obviously, the leadership of Ron Clarke, the vision he laid out, and our ability to execute along the way has helped us reach this pinnacle, where we're crossing 3 billion of revenue, are highly profitable, and continue to perform really well.

Megan: Something we're seeing in the market is a closer relationship between HR and the CFO. Can you dive into more detail on how you're doing this at FleetCor?

Charles: Sure, and I'd say I had a little bit of an advantage. Our chief human resources officer named Crystal Williams, and I worked together in consulting 22-plus years ago prior to coming to FleetCor. She now reports to me as CFO. Crystal and I engage in all types of programs here at FleetCor because we've grown through acquisition. We have lots of different systems, human resource management systems, payroll systems, and things. We have a midterm plan to rationalize those systems.

We are constantly working on rewards programs for folks, whether that be the merit rewards programs, our bonus programs, or our equity programs, making sure that we can both attract and retain great talent across the organization. We look at training and development programs. One of my favorites here at FleetCor, we call Global Leader, is designed for senior vice president level folks who are maybe coming into more executive leadership type roles, connecting them with their colleagues around the world, and helping them think through what it means to be a real leader, not just managing people, but truly leading from the forefront.

Those are the types of things that Crystal and I work on, constantly engaging on those things and how they apply to different areas of the company, whether different levels, or different geographies. Obviously, things need to be tailored. One of the things we're super proud of here is our efforts in diversity, inclusion, and belonging. We've set up a global council on which I sit. We have regional councils. We've set up, I believe 12, now, employee resource groups around the world helping underrepresented populations to feel connected with each other, and with the company.

I participate in various programs with folks all around the world in that regard, and so really delighted with, one, learning through the programs and the training that we get, and also then being able to engage with all of my colleagues from a more informed and sensitive position.

Megan: Sounds like you guys are very thoughtful about your talent. I'm curious to know with the way the talent market is right now, have you guys had to make any changes to the way you're doing things? How are you continuing to attract and retain talent when it doesn't seem to be plentiful?

Charles: [chuckles] There's a battle going on and we are fighting the good fight. We have made certain adjustments in terms of compensation in wages in various areas. I would say our merit increase budget this year, we're going to exceed that a little bit in an effort to fight off the competition.

Our story luckily does speak a little bit for itself. FleetCor isn't a household brand name as a business-to-business operation. We don't market a lot on billboards, you're not going to see a lot of television commercials, but for people who are in the payments space, they'll know about us based on our track record, and that in and of itself helps a lot. As you mentioned our focus on people and the culture here is quite unique for a company of our size.

We have been able to keep that entrepreneurial dynamic creative-as-you-go type of culture with proper controls and such in place, but not over-burdensome in terms of structure, process, bureaucracy, things that often come when you get to a company of our size. We've done, I think, a phenomenal job keeping that entrepreneurial spirit alive, which attracts certain types of folks.

We want to work hard, enjoy it, create, and build value. If that's what you want to do, not just administer something that's already built, but go and create new things, this is a really exciting place because we have the capital, we have the expense structure, we can afford to go and do new things which can be hard to do. If you're in a startup and you run out of capital, that's no good, or if you're in a larger bureaucratic, overly-burdened business, it's hard to be as dynamic.

I think we've found this interesting middle ground with our culture and our approach that helps us attract the folks that we need to keep growing the business the way we want to grow it.

Megan: I see that FleetCor recently acquired a UK-based cross-border payments business called Global Reach. Can you talk more about the company's growth strategy and the role that you specifically play in M&A?

Charles: Certainly. FleetCor's overall growth strategy does bifurcate. We do focus a lot on what we call organic growth. This is where we sell more business and clients than we lose, and that way we can continue to grow, even if we don't do M&A. However, we supplement that organic growth with a very thoughtful acquisition strategy. When we approach any target, we look at what we call the thesis, our year 1 thesis, "What are the initiatives that we are going to employ to improve the growth trajectory and the profitability of this target?"

For us, Megan, it's less about what we buy and more about, what can we do with it either on its own or in conjunction with other assets that we already own. That could entail cross-selling. It could entail the monetization of payments through some of our networks whatever it may be.

If we can find synergistic opportunities with other assets that we have to create the "1+1=3" scenario, we will do that. If we don't, the asset is still super attractive on a standalone basis, given the ideas we have, given we've seen so many different businesses and valuated things, things we own, things we've looked at, but decided not to buy, we have lots of ideas on how to create value. When we look at a target, we put it through this ideation process, "What could we do with it?" We come up with that. We model it. If it meets then our return thresholds, then we will proceed.

In this cross-border instance, this would be the third cross-border business that we would've acquired. A few years ago we acquired a business called Cambridge Global Payments. That was our first foray into cross-border FX- the FX business. About a year ago, we closed an acquisition for a company called AFEX, A-F-E-X. That business looked a lot like the Cambridge business. It operated in similar geographies, but with a different overlap, and different strengths. Where Cambridge was really strong, say, in Canada, it had operations in the UK, AFEX was really strong in the UK, it had operations in Canada.

The footprints were highly complimentary. They were in the same geographies, but in terms of scale, highly complementary, selling very similar products to a very similar customer base. The idea was we could buy this business, run it on our platform and with our operations teams and basically get incredible cost synergies on the back end once we're integrated. We have not yet fully completed that integration, but we're very, very close and have made progress obviously along the way and have benefited from the progress we've made. By the end of this year, that integration will be a hundred percent done.

Global Reach is version 2.0 of that same kind of playbook, where they're in similar geographies, and I'm buying a portfolio, that I can move that portfolio onto my systems and generate all the same types of synergies. We think this is a really interesting strategy specifically for that cross-border FX business, as there are many fragmented players outside of the major banks that operate in this space, but don't have our scale. Since we've now proven our capability to integrate an acquisition onto our core platform, we have incredible confidence to go out and bid a good price and be able to port the next target in a very similar fashion.

Megan: Once you've made an acquisition, how do you quickly and successfully work on integrating it? How do you spend your first 100 days?

Charles: Integration does take different forms, in some cases, where the business is more standalone. It may be in a new type of payments category that we haven't operated in before. Similarly to Cambridge, a few years ago, we weren't in cross-border FX. It's standalone.

The things that we focus on first and foremost, we get control of the cash, make sure that we have all the controls in place for that, we get control of people, people policies, making sure we're in compliance with things, making sure that people don't hire/fire without us knowing and follow the rules, and then systems, making sure one that they're secure from a data security perspective and then obviously they're built to run. Making sure systems work, people are controlled, cash is controlled, that's, first and foremost, what we're on. That's all around control and stability.

Then we immediately start on our initiatives. What we'll often do is assign a project manager, that may be someone out of the corporate development group or our strategy teams and they'll play coordinator, then we go and basically engage the management team. We share the vision, "Look, this is what we're trying to accomplish. Here's how you're going to benefit from that."

There may, in some cases, be certain financial incentives for people to help us achieve these integration outcomes, and then we get to work. That work could be around setting up new sales channels, maybe product innovations. It may be system conversions, whatever it may be. Again, it's always specific to that target based on the opportunities that we've already identified through our diligence process.

Megan: FleetCor is in the process of expanding its portfolio, especially in the EV sector. First of all, what is EV?

Charles: EV, electric vehicles. This is, as you might see in the headlines and the news and such, a very, very hot topic, focusing on, it's better for the environment. In some cases, it can be cheaper for the consumer, the driver.

Historically for FleetCor, we've sold a lot of fuel cards. Now, fuel represents about 40% of our business today. We have diversified a lot. As an example, when we went public in 2010, fuel was over 90% of our revenue. We have diversified a lot. However, it's still a meaningful portion of our 3 billion-plus in revenue, so 40%. One of the concerns is, "If everyone goes to EV, do they still need your services?"

One of the things we try to explain to folks is that our services aren't just about buying a fuel commodity. It's about controlling the fleet purchase. Whether you're buying fuel or electricity or an oil change or whatever it is, you want to spend the company's money in a smart way. It's really more around expense management. It's not specific to fuel, but nonetheless, as folks transition to EV, the services need to evolve.

What I mean by that is different networks. Not every EV is going to be charged at a gas station or EV chargers at the shopping mall and hotels and other places. You need a different network to serve those types of vehicles. You need the ability to track at-home charging. When people go home and plug their EVs in, it's not free. It's like running your air conditioner with your front door open. It's a large appliance that's consuming energy. You want to control those costs and be able to reimburse your employees in a timely way so they're not out of pocket for re-energizing that company vehicle.

The nature of our services is still around data and reporting of volume, whether it's how much fuel you buy, or how much electricity you use, looking at that across vehicles to see why certain drivers might use more and consume more energy than others. That has implications on battery life and obviously expense costs. All these similar types of expense management and data and reporting that allows a fleet manager to manage a fleet of internal combustion engines will also help them manage a fleet of electric vehicles.

Now, many fleets don't really convert all at once. They may have a fleet of a hundred vehicles and they may take 5 or 10 and turn those to EV, and then continue to run the other 90. For us, having the ability to get all that different data and provide one comprehensive view of a fleet for fleet managers is quite important. What we've done in the last two years is a partner with and make minority investments in a couple of companies that provide these types of services.

Over in the UK, we made a minority investment company called Mina. Mina helps us capture charge data at home, when an employee's at home, and reimburse the utility for that charge immediately. Therefore, when the utility bill shows up in the driver's mailbox, they don't have to pay for the company's electricity. That's already been done. We turn around, we bill the company directly, and therefore the driver is never out of pocket and saves the fleet manager and the company the whole "Submit expenses. Give me your utility bill. Let's figure out what percentage of this was for the company vehicle versus the air conditioning you were running." It eliminates all of those needs.

In the US, we've actually partnered with a company called Motor, M-O-T-O-R-Q, and they're a connected vehicle company. They grab data from the vehicles that are driving all around. When a vehicle goes and plugs into an electric charger, whether it's at home or out in a network, we're pulling all of that charge data from the vehicle. Again, we can report the usage to the fleet manager, and if you are out in the network and you're using one of our card products, then I can also handle the employee reimbursement aspect of that as well.

A couple of minority investments there, all of which have been focused on serving existing fleet managers who are in the process of migrating their fleets to EVs. I would tell you that that's a fairly slow-going process. Car vehicle fleets move a little bit faster than the vans and are as available for as long, which are moving faster than the box trucks, which are moving well faster than the over-the-road 18-wheelers, which when you load them up in a lot of weight, it's difficult for the batteries to maintain life. The migration curve here is slow, but we want to be ready for it. We're getting upfront with pilots in certain investments to figure out which products fit best for which use cases with our fleet managers, and that way we're prepared for the migration.

We're now starting to shift our strategy a little bit, Megan. What I'd say is, that everything we've done thus far is more defensive. It's helping existing clients manage their migration. What we want to do is focus more on an offense strategy. What I mean by that is looking at investments in other areas of the electric vehicle ecosystem, which would allow us to more benefit from the migration curves.

In some cases, investors have a bare thesis that if electric vehicles come on, maybe people don't need FleetCor services as much. I refute that and remind people that it's not about buying fuel, it's about data and managing a fleet. However, the concern remains for some. We are looking at other investments where we might serve as an example charge point operators, who need software to manage their sites, and who want to accept different types of payments like from us and others.

Looking at software there, where we can provide that, helps us build out a network, but also then allows the charge point operator to operate their sites, not only for commercial fleets but for consumers or whomever else. That would be one example of an area that we're looking at. The whole idea is that electric vehicles are coming, we are here to help our fleets make the migration if they so choose, and even if they do, we are going to play in the ecosystem in another way that allows FleetCor to benefit a lot from the upcoming electric vehicle migration.

Megan: You mentioned being more offensive rather than defensive. How do you help FleetCor to do that? With so many unknowns and an unpredictable future, how are you guys trying to be offensive rather than reactive?

Charles: In this case, we're actually looking at other segments of the EV ecosystem. In the past, we were only looking at our fleets, commercial fleets with vehicles that'll someday go electric. Now what we want to do is look at other people who are in the ecosystem. These might be the charge point operators themselves, it could be electric vehicle manufacturers, it could even be consumers.

I saw a survey, "Consumers, why are you hesitant to go out and get an electric vehicle?" One, is cost. They're still kind of expensive, I'm not sure I'm going to get the return that I want for this. Two, I have some range anxiety. I'm not sure the battery really is really going to hold up for all my driving, and then what do I do? The third one is around the availability of chargers. Even if I know where to go and there's one close by, is it available? One, is it functional? is it working? Reliability has had issues, they've had some issues. Two, is someone else already there, and are they going to be there for an hour using it? Because I don't really want to spend that kind of time.

With some of the software that we're looking at, we can provide maps, find a location, reserve a location, and look and see what level of charging is available. Is it a rapid charger that would take you an hour, or is it a slow charger that could take you up to eight hours? That would be at a hotel so you can book a room. These are the types of things that consumers are worried about. If we have software that the consumer can find, book, pay for electricity, it's tied to charge point operators that can accept the payment, and operate their site, and get volume and revenue in that regard.

Go to, say, a car manufacturer. They may want to provide in-curve purchases. "I want my electric vehicle to be able to go to a charge point operator, plugin, and I want to be able to enable the purchase." Okay. Are you, whatever car manufacturer, going to go out and negotiate with all the different charge point operators all around the country, and in our case internationally? Individually, are you going to go to them and negotiate deals, or do you want to come to me? Because I've already built the network because I'm building that infrastructure for my fleet clients. Now I can leverage it for other people.

Use me and the software I've embedded everywhere to enable your- whatever type of vehicle it is, to go to any charge point you want using my software. These are the types of things that we're looking at, continue to evaluate, and then we'll be placing some bets pretty soon.

Megan: Let's switch gears and talk about ESG. More and more we see the CFO taking on the responsibilities related to ESG. Can you talk more about how you're leading these efforts at FleetCor, and also the ESG report that you guys provide?

Charles: Certainly. Delighted to report that I did spearhead our initial publication. It's been about two, two-and-a-half years ago, we had our initial report. I would say that the company was doing a lot of things in and around environmental, and social governance programs, but had not really communicated it to the public and to investors. I took that on with our marketing department and our investor relations team. Couple of years ago, we put out our first report.

I think it was good. Technically January of this year, but our last year's report, which we published a little bit late, was a supplement to that initial report. We got feedback on areas where we can make more efforts, so we did launch additional programs and such, but also, again, just making sure people are aware of all the great things that FleetCor was doing, we just weren't taking credit for them.

We are in the process now of drafting yet our third report, which should come out in the next month or two. Some of this is around just making sure we've documented and made it clear all the great things we're doing. Of course, through that process, it identifies other opportunities. I'd say that through COVID and such, we focused a lot on employees: mental health, connections, communication, et cetera. It was a big, big push and I'm super proud of what our human resources teams did during those difficult times.

In some cases, some of our products are actually beneficial for consumers. An example would be in Brazil we provide payments for commuters who can't afford to own a vehicle in Brazil. By law, the companies in that country, need to provide a commuter benefit. We actually administer those programs, those folks can commute to work, and then basically have all of that prepaid by the company. It helps us with financial inclusion, similarly, to our pay card products, where folks may not qualify for credit cards and such, but by getting their wages put on a prepaid card, they can go out to restaurants and use it, they can go online and make purchases. Some of our products help with financial inclusion.

Obviously, the work we're doing in electric vehicles to help fleet managers make the transition in a seamless and frictionless way will, eventually as the migration curve comes, help to reduce emissions. We've taken on our own data center footprints and we've reduced those to reduce cost. The reporting is one thing, but what it did is it helped highlight other opportunities that we've then been able to pursue in the ensuing years.

More work to do, Megan. I'd say that it's a journey. It's not a project and then you're done. It's certainly not just a report. It is an ongoing process where we evaluate what opportunities sit before us, "Where can we make progress?" and "Where should we focus our efforts?" We can't do everything because there are other things that we're focused on, but we do try to prioritize and make sure that we continue to make progress where we can.

Megan: Yes, it's definitely a journey. 20 years ago, ESG was not even a thing, and now it's become very important.

Charles: I would say probably five years ago I'm not sure I could even spell it.

Megan: [laughs] Charles, lastly, as a CFO, what is keeping you up at night right now?

Charles: There's a lot of discussion about a potential recession. You see it on the news. I'd say in our businesses, similar to how the banks have reported, we haven't really seen it yet, but given the news cycle and such, inflation where it is, interest rates where they are, where they could be heading, it's quite possible that we could be facing this. We're looking at, "Where might we have any soft spots? How do we want to think about credit and such?"

These are things that come and go, the cycles come and go, but you just want to make sure you're prepared and reserved appropriately and make sure that if there are any soft spots, we can shore them up. We've been through this before, whether it was 2008, or 2009 global financial crisis when FleetCor was basically flat for the year, over a year, with no major reductions in staff or whether it was COVID, which affected us disproportionately, given a lot of our payment products have mobility elements to them, fuel, tolls, lodging, but even that, weathered the storm and came out stronger on the other side.

I'm very optimistic that we'll, once again, battle through this, whatever it turns out to be, whether it's a category 1 hurricane or something bigger as Jane Dymond alluded to. Either way, I think FleetCor is very well positioned with the strength of our balance sheet, our liquidity, and our operating margins. I think we're just in a really, really strong position to weather any storm that comes.

Megan: As you mentioned, challenges always present opportunities.

Charles: Indeed. We will capitalize as we have in the past.

Megan: Charles, thank you so much for being my guest today.

Charles: Megan, I really enjoyed it. Thanks so much for inviting me.

Megan: Really enjoyed speaking with you and I appreciate you taking the time to be here with us today. I wish you and FleetCor all the best. Sounds like you're both doing amazing things. To all of our listeners, please tune in next week. Until then, take care.

[music]

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In this episode, we discuss why CFOs should work close to HR, international growth strategies, the science behind M&As, how to lead a successful integration process, amongst other interesting topics.

Working Close to HR

Quote working close to HR for business growth

The current market determines CFOs to develop a closer relationship with HR managers and collaborate on various programs, like reward programs, training, and development, to attract and retain great talent. Another big focus where CFOs collaborate with HR is ESG initiatives.

“One of the things we are super proud of is our efforts in diversity, inclusion, and belonging”

Smart Growth Strategies

Quote Charles Freund, CFO FLEETCOR

FLEETCOR's overall growth strategy does bifurcate. The company focuses on organic growth, where it sells more business and clients than it loses. But the company also supplements organic growth with a thoughtful acquisition strategy. When approaching a target, the team thinks about the initiatives it could employ to improve its growth trajectory and profitability. If the model is successful, FLEETCOR will proceed with the acquisition process.

“For us, it's less about what we buy and more about what we can do with it, either on its own or in conjunction with other assets we already own”

Next on the List... M&A Integration to Achieve Business Growth

Quote m&a integration to business growth plan

Once the acquisition process is done, you should work on integrating the acquired company. First and foremost, focus on controlling the cash, people, and systems. Assign a project manager that will coordinate the whole process. Then, engage the management team and start working on building new sales channels or innovating products.

“Integration does take different forms”

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