More than halfway through 2018, we see corporations generally enjoying an influx of cash and improved business conditions, and benefitting from new tax laws. These trends are helping make 2018 one of the strongest years for mergers and acquisitions (M&A) in history, with current M&A activity 50 percent above the 2017 pace.
What does that mean for finance and accounting leaders? These leaders often find themselves heavily impacted by dramatic business change, and may do well to consider what activities they can undertake now, before they even hear from the CEO about an imminent merger or acquisition.
As Protiviti points out in our M&A Playbook, these massive projects are among the most challenging any business can undertake. As is so often the case with major business change, finance and accounting are impacted disproportionately to other business functions. Integration of people and processes (to say nothing of technology) must be supported by organizational change management while also maintaining the focus, scrutiny, coordination, reporting and controls that any such significant, visible and complex project demands.
Even before getting wind of a merger or acquisition, a finance and accounting leader might already have concerns about running too lean, staffing up for peaks in activity, or accommodating other business change. And any such leader might one day hear from their executives, “We just acquired a new company.” So, what’s next?
Savvy leaders know that the smart first step is to clean up their own house – make sure processes are reviewed and documented, accounts are reconciled and data is normalized before integrating the books of a new company. Having a flexible staffing model in place beforehand is beneficial, so that chunks of work can be rapidly delivered to a defined standard.
Getting the finance house in order will make pending acquisitions go more smoothly and free up capacity within the core professionals whose expertise will be required for reviewing the acquired firm’s books, analyzing impacts, preparing filings and planning the integration. During a merger or acquisition key resources may be called upon to travel, and typically get drafted to lead work streams related to the event. A trusted partner who knows the challenges a finance executive will be facing and can bring experienced resources quickly to backfill for shorthanded staff during these busy times may indeed prove invaluable.
Having contractors to tackle tactical and higher-level tasks is helpful; having a partner to draw on who can rapidly custom-configure a team and flex up and down as needed is ideal. When new needs arise suddenly – as they would in a merger or acquisition scenario – such a partner would enable the quickest response and greatest flexibility to scale up or down in both size and skill mix.
To avoid the detrimental effects of poor acquisition integration on the finance function, including staff turnover and attrition, we suggest CFOs take the following actions now:
- Reconcile accounts and ensure quality of data: Ensuring that your data is normalized and your books are in scalable order prior to the integration will facilitate analysis of any issues arising from the integration.
- Review and document processes: Don’t be the team that lost the one resource who knew how to bill certain transactions. Identify resources in the department to document current processes to ensure you don’t lose sight of critical tasks. In a booming M&A market, such process documentation can prove extremely useful on a very short notice.
- Have a trusted partner in place before you need them: It is not just possible but highly recommended to have a trusted partner in advance. Having an existing relationship costs little until it’s needed, but when it’s needed, it’s priceless.
These three actions have proven key success factors in mergers and acquisitions, in our experience, resulting in positive integration outcomes and higher employee morale. By taking this straightforward and disciplined approach, the finance and accounting function can mitigate the traditional 70-to-90-percent failure rates of integration and contribute to accelerating the organization’s vision in today’s disruptive business environment.