Acquiring another company to get access to new customers, products or technologies can be one of the most critical decisions a business owner can make. Fortunately, your CFO is in a unique position to contribute significantly to the merger and acquisition (M&A) transaction process and, eventually, influence the success of the deal.
A CFO is required to carry out a wide range of tasks, from corporate strategy and board engagement to obtaining financing and reporting to stakeholders. However, M&A work can be more complex today than ever before, so it's essential to have a specialized team member who can handle the due diligence required of these transactions.
Hiring a full-time, in-house CFO with experience in deal-making can be costly, in addition to being rarely needed for a regular company, since these skills are relevant only for a short amount of time.
A cost-effective solution is to outsource this work to a CFO who has deal-making capabilities, as you'll end up paying only for the period and tasks needed. This person requires no training as they are an expert in deal-making, and can set your company up for the most successful deal possible.
So if you are trying to acquire smaller companies for growth or raise capital, or you're looking to sell your business, an outsourced CFO can help you at every stage of the deal process.
Creating the Transaction Plan
Before an M&A deal can be finalized, the CFO must carry out extensive due diligence in order to solidify the rationale behind expected outcomes. They need to consider financial questions about pricing expectations, risk and value add. And since they should be able to communicate the overall vision for the deal to all stakeholders, one that aligns with your company's bottom line, the CFO will have to conduct research that's both qualitative and quantitative in nature at this early stage.
To maximize financial efficiency, the CFO must provide minimum benchmarks that the stakeholders both understand and agree with before entering into a negotiation. Hence, the next steps before a deal can take place involve setting up financial requirements for earnings per share (EPS) timelines, the internal rate of return (IRR), and basic planning for acquisition financing.
Maximizing Synergies
After due diligence has been completed, the Outsourced CFO turns into chief negotiator, ensuring that your business achieves the best possible outcome.
Since both the buyer and seller want to maximize synergy to ensure they're getting the most a deal can financially offer, it's essential at this stage that both parties maintain open communication about acquisition conditions, growth potential, and other financial targets that will make the merger or acquisition a success.
Next, once the negotiations advance and the transaction come to a close, the CFO will need to create a comprehensive integration plan. To build this, they will have to work with all departments to define design incentives and performance metrics, as well as appointing those who will be responsible for carrying out the plan.
Integrating for Operational Efficiency
To successfully integrate two companies and their cultures, the CFO must have an informed perspective on the values, the transformation opportunities, synergies, and the potential cultural pitfalls so they can be ready for anything.
Apart from this, once the deal is closed, the CFO also needs to come up with a way to monitor the progress of the acquisition. If a system developed during the planning phase doesn't deliver the expected results, the CFO must be able to figure out the problems and also be ready with other possible ideas and solutions. This is where choosing the right performance metrics early on comes into play - you can't reflect and pivot if you aren't able to measure what's wrong with the system.
Effectively integrating one company into another and aligning practices can be challenging. To make the transition smooth, an outsourced CFO might hold training workshops for the new company to ensure that all staff members are aware of and understand the new goals and to present ways of working toward them. For this, the CFO can choose (after consulting with you) to explain the reasons and results of the deal and the expectations for the newly-formed entity.
Content Source:- https://www.sooperarticles.com/business-articles/financial-management-articles/how-outsourced-cfo-can-help-due-diligence-1788195.html
If the COVID-19 pandemic has taught businesses anything, it’s that they must be prepared at all times.
That’s why, in addition to preparation, you should have a high-level defensive strategy to deploy when unexpected events hit your business and cause financial stress.It’s no secret that businesses all over the world are facing financial stress as the pandemic continues to loom large.
This is often the first step in dealing with financial stress because it can show you where you are and where you want to be.
Then, the CFO creates strategies that help you get to your goals.Without strong financial systems and processes in place, your company can’t develop the right roadmap that will allow you to alleviate the financial stresses you’ve faced.Tax Planning and Compliance AdherenceCFOs are trusted advisors who help businesses maintain compliance with the latest rules and regulations.
Your CFO will be in charge of preserving compliance with government policies for your business during every transaction and funding round and can provide guidance during tax planning periods.Although this may not seem like a primary concern when your business faces financial stress, keep in mind that accusations of noncompliance can be time-consuming and costly.
They identify which business activities drove the change, such as inventory turnover and sales, to track how the company is doing and identify actionable insights.Your CFO should be able to ensure and assess the quality of the financial and operational data drawn from various sources.
There may be times when as a business owner you might have to handle multiple projects simultaneously.
This is where we can help you.
At Accounts Confidant, we provide Outsourced CFO Services to help manage all of your workloads.
Our team works with your management team to handle your financial tasks with great efficiency.
Our Virtual CFO services give you access to a chief financial officer who can help your business grow.
Also, hiring a full-time CFO is extremely expensive.
