At a recent CFO Leadership Council event that Host Analytics sponsored in New York City, an interesting panel discussion was held on the topic of “Post M&A Integration.” The panel included senior executives with M&A integration experience from Radius, Randstad Staffing, KPMG, and Pine Hill Group. Here’s a quick summary of the key points that were discussed:
The CFO Role
- CFOs have a key role to play in M&A integration. They should take the lead on communicating the strategy and thesis behind the merger, define the integration teams and process, and select the right integration team leads by function.
- CFOs should be the “conscience” of the organization and act as a “clinical” 3rd party reviewing and evaluating plans of integration teams.
- CFOs ensure expected synergies are fully evaluated, consider negative synergies that could occur, and set realistic expectations for stakeholders.
Internal Structure
- Strong business processes and systems are critical to the success of a merger. The acquiring company needs to have processes and systems that can easily accommodate acquisitions. Companies that operate based on “science” are typically better positioned than those operating on “art.” In other words, companies want less defined processes and more reliance on key individuals.
- In a merger of equals, the CFO with the best internal processes and systems will typically survive and take the lead.
- System integration can be complex and take longer than expected, so plan this carefully. If the businesses are similar, moving to a single system likely makes sense. But if the business models are different, then having separate systems could be a viable approach.
Essential Exit Preparations for Small Companies
- Demonstrate revenue growth – this is critical
- Act like a public company from an early stage – i.e., regular audits using major audit firms
- Develop repeatable, scalable, and predictable business processes
- Ensure the ability to report the financial health of the business regularly in a repeatable fashion
This panel discussion got me thinking about the role cloud-based EPM solutions can play in M&A integration and where we have specific customer examples of this. Two key scenarios come to mind.
One is for private equity and other firms that invest in multiple businesses and need to manage a portfolio of companies over time and report their financial results. In this case, cloud-based financial consolidation and reporting systems can be a big advantage. They can be set up and deployed quickly, can integrate data from multiple GLs, can easily consolidate and report financial results on a repeatable, predictable schedule, and don’t require a large up-front investment.
Another is for companies that are in acquisition mode and need a way to quickly integrate acquired companies and produce consolidated financial results. These companies also need a common platform to support planning, forecasting, and management reporting across multiple companies/divisions. Cloud-based EPM solutions can play a critical role here as well.
By John O’Rourke, EPM Channel Contributor, from: http://www.hostanalytics.com/blog/the-role-of-cloud-based-epm-in-mas
John O’Rourke is Vice President of Product Marketing at Host Analytics. With a background in accounting and finance, John has over 30 years of experience in the software industry, and over 16 years of experience in EPM Product Marketing at Hyperion Solutions and Oracle. He has worked with many customers and partners on financial reporting and planning initiatives and has spoken and written on many topics in enterprise performance management. John has also held positions in strategic marketing and product marketing at Dun & Bradstreet Software, Kenan Systems and Decisyon. John has a BS degree in accounting from Bentley University and an MBA from Boston College. See John’s articles on EPM Channel here.