(This is the 3rd article of a three-part series – How a CFO can help in an M&A transaction.) You can read part 1 of the series HERE. Read part 2 of the series HERE.  

I always say that doing the deal is the easy part, it’s the work after that can be the hardest part.  This view is generally directed at the acquiring company, but there is still work to be done on the seller’s side including the employees that are transitioning to the new company.  

Communication:

This is one of the hardest and most overlooked parts.  The first challenge is when to communicate to your employees and the rest of the world that a deal has been done.  The timing of this is critical.  Saying something too early or too late can kill a deal.  In addition to timing, messaging is a key component that gets mishandled quite a bit.  I can’t tell you how many times I have heard employees of the acquired company say, “I have no idea what is going on.”  

Accounting:

Are you keeping your accounting system?  Moving on to theirs?  How will payroll, invoicing, and AP work?  Are there working capital adjustments to be calculated?  What happens when a bill shows up late that was for expenses incurred before the deal closed?  A good CFO will have a plan for this and can anticipate these challenges in advance.  

Human Resources:

There are a million HR issues – big and small – that need to be worked out after the deal.  How does our vacation policy compare to theirs?  Are we going on their health insurance or are they coming on ours?  What will the reception of the employees be?  Are the cultures similar or vastly different?  Where will people sit?  Will the new company recognize my years of service with the old company?  Will some positions be redundant?  A CFO with prior M&A experience will help you navigate these waters. 

Earn Out:

Many deals these days have an earn out component.  This means that some of the deal compensation is tied to future performance.  Your CFO should have been involved in the calculation of this earn out compensation during the transaction phase.  The CFO will also be a key person post deal to ensure that the business is still performing during the transition.  They are also involved in making sure that the compensation calculations are adhering to the definition and spirit of the agreement.

These M&A deals can span months or years.  Your deal team, including your CFO, will be some of the most important people involved in your transaction.  Your team will ensure that you can get the most out of your transaction and increase the probability of success for all parties. 

If you would like further information about Crown CFO & fractional CFO services, reach out to Mike DeMaio – [email protected]