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Mergers & Acquisitions

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Over time, the needs of your business are bound to change. Sometimes your company outgrows its market, and sometimes the market outgrows you. The wisest way forward may be a merger or acquisition (M&A). Mergers and acquisitions are not simple transactions, nor are they quick. Negotiations, valuations, and other strategic planning may stretch on for months, tying up your c-suite and wasting valuable resources in the process.

With fractional CFO consultancy, you can free up your chief financial officer and offload stress from your CEO or owner by contracting with a seasoned professional who can handle the precise, litigious, and time-consuming work of your M&A.

Related reading: 7 business valuation mistakes to avoid

Merger vs. acquisition

Mergers and acquisitions are two different processes, although often used interchangeably since they are both ways a company can expand and gain market share.

A merger refers to two separate entities coming together to create a new organization. The resulting company would then have a new management structure, with members from both entities.

An acquisition means one entity absorbs or takes control over a different organization. In this scenario, the smaller company is absorbed by the acquiring one (including all assets). This is also sometimes referred to as a takeover.

Pre-merger services

There's a lot of highly-detailed paperwork involved in the initial stages of your merger. There's also a lot of analysis and old-fashioned number crunching involved before your M&A can proceed to negotiations. This stage is a huge time sink for your financial team, or in the case of some small to medium businesses, the company owner.  It's also critical in order to ensure that your M&A goes smoothly and you get the full value that the company is worth.

During this phase, the CFO's responsibilities include:

  • Valuation
  • Ensuring compliance with government entities
  • Filing tax documents
  • Preparing a post-merger integration plan
  • Negotiations

A CFO's primary responsibility in the initial stages involves analyzing the company's assets, debts, and overall financials from a comprehensive point of view in order to establish a base value from which to negotiate. Mergers go better when the CFO is directly involved in the negotiation process. Their deeper awareness of the company's financials can help the CEO carry out a successful negotiation.

It is also the CFO's role to provide visibility and clarity for their valuation methods to key officers or ownership. The CFO must evaluate the company's financial health and performance while guiding its direction going into negotiations.

Issues of compliance go hand-in-hand with the pre-merger phase. The CFO is responsible for any tax considerations or financial reporting necessary in preparation for the merger. It is also essential to begin developing your post-merger plan during this stage.

Post-merger services

If the CFO is essential prior to the merge, then they are critical afterwards. Post M&A, CFOs are responsible for shaping the resulting corporate entity, ensuring that it is positioned for maximum profitability right out of the gate.

Related reading: aligning your team and business vision

The CFO is in the driver's seat when forming an integration plan. Integration is like making sure that a set of two different-sized gears mesh perfectly together. For that to happen, the CFO needs to analyze both companies' numbers for:

  • Points of synergy
  • Opportunities for restructuring
  • Ways to eliminate costly redundancy

The CFO is also of critical importance in tax planning and strategy going forward, including all statutory tasks such filing appropriate financial paperwork and accounting for the cost of the purchase.

The advantages of a fractional CFO

The CFO plays an important role in the M&A process from beginning to end. A merger is no small thing, however. It's one of the biggest, most involved processes two businesses can undergo. Preparing for an M&A does not absolve your company's financial officer from their day-to-day tasks. If you are a small to medium-sized business, you might not even have a dedicated CFO; the role ultimately falls on the CEO/ owner's shoulders.

No matter which camp you fall into, fractional CFO consulting can provide your company with experience and expertise on a short-term basis to help you sort through the ensuing financial jungle that comes with an M&A.

Freed from the administrative and strategic tasks involved with a merger, your company's leadership can focus on building the best new corporate identity possible post-merger. The experienced fractional CFOs at Focused Energy can help. For additional guidance and information, contact Focused Energy to help you complete your M&A.

Whether evaluating options for growth or setting the stage for a successful exit, we can help you achieve your goals.

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