The vast majority of mergers and acquisitions are not as successful as planned. Most do not achieve the return on investment goals used to justify them. CFOs are usually called upon by investors, creditors and other stakeholders to explain the success or failure of a merger or acquisition. It is no wonder that CFOs worry about mergers and acquisitions.
The three top concerns for CFOs during mergers and acquisitions are planning, cultural differences and execution. Here are some of the reasons why these concerns keep CFOs awake at night.
Prior to closing a merger or acquisition, extensive planning is required to understand what will need to be done after closing to successfully integrate the businesses. Pre-close planning should be an integral part of the due diligence process.
Due diligence should be much more than checking financial results and legal matters. It needs to include a full understanding of how the target business operates, and whether it can be successfully integrated with your business.
There should be a thorough evaluation of every major aspect of the target business including:
- Products, services and related technology
- Sales and marketing
- Organization and staffing
- Company culture
- Manufacturing, distribution and supply chains
- Transaction cycles
- Policies and procedures
- Information and communication technology
Once you understand the target business, you can decide whether the merger or acquisition will be successful, and plan the actions required to achieve the desired return on investment.
Company culture is a key ingredient, which makes a company work or not work. It plays an essential role in a company’s success, but it is an amorphous element that is difficult to understand and measure. It is vitally important to understand the culture of the target business, and realistically assess whether the cultures will be able to integrate successfully.
Not giving enough weight to cultural differences can result in failure of a merger or acquisition. The best example of this is the staggering loss that resulted from the unsuccessful merger of AOL and Time Warner.
Once a deal is signed, the actions planned to integrate a merger or acquisition need to be executed. Failure to properly execute post-close plans is a major cause of failure. Poor execution of plans may be the result of a number problems including:
- Poor planning
- Cultural differences
- Unanticipated problems
CFOs need to plan ahead to successfully navigate these concerns for their companies and finance departments. In finance departments, consideration needs to be given to how to sync information from multiple business systems so that it can be successfully integrated for management and analysis.
Plans need to be made to automate accounts receivable systems to achieve goals for cash flow. Cloud-based software and advanced communication technology need to be assessed to facilitate the use of technology tools.
Anytime collect is a leader in cloud-based and premise-based software solutions, and an experienced software partner that can sync information from virtually any business software application.
If you would like to learn more about how you can benefit from consolidating software, please contact Lockstep Collect at www.lockstep.io.