Finance Integration and Divestiture
How good deals deliver measurable value
Historical data shows that more than 60 percent of M&A transactions fail to create expected value. But if they’re managed well, mergers, acquisitions, divestitures and spin-offs remain powerful business strategies that can capture significant value. How can you turn a deal that looks good into a deal that delivers? By defining where you want to end up – and putting a well-tuned finance department in charge of getting you there.
Deloitte’s breadth of services supports many elements of the M&A lifecycle from strategy development to tactical support. Learn more about the offering.
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Making various CFOs hats fit better
We believe/ Based on our experience the value of an M&A transaction can be expressed through five key results: integration strategy and management, revenue growth, operating expense savings, asset efficiency and reduction in cost of capital. Because these areas require a high level of financial management, the role of the Chief Financial Officer (CFO) has grown accordingly. Today’s CFO is responsible not merely for charting the progress from value envisioned to value captured, but also for driving it. This includes most aspects of the lifecycle from business valuation and target screening to Day One integration, synergy management and tax and accounting strategies.
From due diligence to transaction close, M&A can take as long as six to eight months, followed by another six months to a year to complete integration, exit Transitional Service Agreements (TSAs) and capture synergies. During this period, CFOs who are already grappling with an expanded scope of everyday responsibility, find themselves stretched even further. How can one person manage all this effort without making costly errors during the transition? Our M&A Finance practice helps CFOs meet these challenges by supporting them in their various roles: catalyst, strategist, operator and steward.
How we can help
Deloitte’s breadth of services supports many elements of the M&A lifecycle from strategy development to tactical support. Some of the services we provide are:
- Corporate strategy and development
- Operational due diligence
- Target screening
- Merger integration and divesture
- Back-office and shared services integration
- Day One planning and readiness for all CFO-related sub-functions
- Finance organization design
- Finance systems integration
- Methodology and playbook development
- Operating model development
- Program management
- Synergy analysis and tracking
- Tax and treasury risk assessment
- Transition services advisory
When integration is the job at hand, our teams help CFOs deliver on focus areas such as:
- Facilitating accurate close & reporting
- Finance operations
- Tax and treasury
- Creating shareholder value though tangible benefits:
- Increased shareholder value through faster synergy capture
- Effective working capital management
- Improved SG&A cost structure
- Faster, more effective management of the combined enterprise’s growth
- Effective tax planning and strategies, including legal entity rationalization
- Managing risks, facilitating compliance while maintaining business continuity:
- Effective financial and non-financial risk management
- Stabilized operations that support customer and supplier strategies without negative customer or employee impact on Day One or beyond.
- Reduced risk through compliance with statutory requirements
- Business continuity though customer and talent retention
Four ways to get more value now
An M&A transaction is thick with details, heavy with responsibility and often the most important thing on a CFO’s plate from beginning to end. Keeping sight of a few principles can help make the experience more manageable.
Begin with end in mind. With so many constantly changing variables, it’s important to have a grounded end state in mind when the process begins. This enables work teams to validate their actions as they go.
Build a blueprint. To maintain momentum toward the defined end state, an organization should confirm the goals and expectations that drove the deal, determine the desired degree of integration and identify the tasks necessary to make it happen. The result is a roadmap that sets specific milestones and identifies dependencies, risks and critical decisions.
Maintain synergy focus. Achieving synergy is one of the most critical outcomes of the M&A process, so tracking it is critical as well. All parties should agree on a baseline and standards of measurement. A robust tracking mechanism uses multiple perspectives to measure value by triangulation.
Identify and retain key talent early. M&A is an inherently unsettling process for employees. It is important to communicate extensively, identify and retain key resources and establish fair and transparent retention and severance policies from the outset.
Finance Integration and Divestiture in action
- Deloitte was engaged to support a client that was purchasing a business unit from a competitor for nearly $17 billion – the largest acquisition in the company’s history. The acquisition was a carve-out from a larger organization, not the purchase of a stand-alone entity. The deal included more than 7,000 employees, 120 facilities and business operations in more than 100 countries. The global finance organization needed support planning for and executing the integration of the two businesses. We helped the client team develop the initial vision of the future finance organization; identify the key finance processes on Day One; coordinate with regions and local markets to define, review and finalize TSA service definitions and cost estimates for finance-related services; and develop Day One finance activity checklists. The company completed a successful Day One and achieved financial close for the health care business, and is on track to recognize more than $700 million in synergies, which exceeds expectations by almost 30 percent.
As used in this document, “Deloitte” means Deloitte & Touche LLP, which provides audit, assurance and risk management related services, Deloitte Consulting LLP, which provides strategy, operations, technology, systems, outsourcing and human capital consulting services, Deloitte Tax LLP, which provides tax services, and Deloitte Financial Advisory Services (FAS), which provides financial advisory services. These entities are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.