The Moment of Truth

You’re eager to prove that you are more than just the keeper of the financial information. You want a seat at the table to help make decisions that shape the company’s fortunes and future direction. Are you ready?

Congratulations. Your big break has finally come.

The chief executive officer just shook hands on a merger that will completely transform the company. Maybe a significant divestiture or spin-off is in the works. Or perhaps a
cross-border acquisition. Whatever the circumstances, suddenly you are thrust into the 24/7 world of making the vision of the deal a reality for the finance function or perhaps as the overall integration lead.

Now what?

Relax. Breathe.

Nobody ever said merger integration would be easy. Now everyone is looking to your lead as the company moves in a new strategic direction. But it doesn’t have to be a long, drawn-out nightmare of late nights and splitting headaches.

In fact, it’s a huge opportunity for you and your team to really strut your stuff. And enhance your own career prospects. But you need to be ready to make the most of it.

For a number of issues now we’ve been discussing the four faces of the chief financial officer (CFO): strategist, catalyst, operator and steward. Nothing brings all of them together like a complex merger, acquisition or divestiture. Although all faces are important, you will need to rely heavily on your catalyst capabilities to achieve results.

The stakes are high. According to our research, 70 percent of mergers fall short of their objectives, and fewer than a quarter earn their cost of capital. If you’re not prepared to tackle the challenges of merger integration, your company risks ending up as yet another disappointing statistic. And it won’t look great on your resume either.

Focus on the catalyst
During the time from announcement to the close, the CFO’s main role is as a catalyst. You need to convert the strategic rationale into specific programs and processes. In doing so you must highlight the people, processes, technology milestones for finance, determine and make key business integration decisions, assess and retain critical resources, understand key risks and develop mitigation plans, and determine cost to achieve related synergies. In the end, it is a clear understanding of how the organization can get to Day 1.

Think of it like building a house. The CFO is the architect, not the carpenter. With blueprint in hand, the CFO coordinates with the executive team, communicates with division heads, and makes sure that the technology, people and processes are in place. If not, the house won’t look anything like the blueprint.

Simply put, plug any gaps that exist between the strategy and execution while keeping the momentum going. (No doubt, you put out plenty of fires along the way.)

The CFO also has to communicate the vision, both internally and to stakeholders outside the organization. For public companies, this means articulating the vision to analysts and investors. While your investor relations and public relations people can help, it’s too important to leave everything in their hands. Finance can help them tell a clear, concrete and consistent story about how the transaction creates value.

Of course, nobody gets all of the details squared away on Day 1. But if you knock off the biggest projects early, your life will be a lot easier. Focus on specific goals like preparing for the first month’s close and locking down the new financial planning and reporting structure. Make sure you have effectively established your new legal entity structure, considering all applicable tax and legal factors. Champion the synergy process to establish clear accountability and tracking procedures. Begin to team with IT to make sure the finance technology infrastructure can support future business requirements. These types of activities may seem obvious, but you’d be shocked at how many companies get it wrong.

Beyond job security, compensation also can be a crucial issue for CFOs to tackle. For example, when America West Airlines bought US Airways, it found that pilots of the target company were generally paid more that its own pilots. Big pay gaps can destroy morale and add uncertainty to post-deal financial projections. If the finance function can’t rise to the occasion and work out a solution, chances are nobody will.

Finally, don’t forget the need for accurate and timely reporting of financial information. When Agilent Technologies divested its Semiconductor Products Group and Automated Test Group’s businesses, the finance organization focused on the creation of carveout financial statements to support both transactions. This allowed them to close on time, and meet the regulatory and buyer terms and conditions, while effectively launching new shared services centers to support the divested businesses. While there are many mission critical activities that must be accomplished during the integration, the CFO and the finance function will need to deliver actionable integrated financial information to stakeholders to allow leadership the visibility required to make the right strategic decisions.

But we’re not done yet.
Closing the deal on time is just the end of the beginning. With pressure mounting, the other roles of the CFO – strategist, operator and steward –must also come into play to help get all of the major processes moving toward the “end-state” model.

There’s no escaping M&A integration. It’s a critical part of the CFO’s role. But it’s your choice whether it becomes something that you dread – or a challenge to embrace.

It’s up to you. Seize the day.

This publication contains general information only and Deloitte Consulting LLP is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte Consulting LLP, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.

Written in association with the Economist Intelligence Unit (EIU) 

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