Financial Planning

Planning for M&A activity: what CFOs need to know

By Simon Bittlestone, Managing Director of Metapraxis
Financial Planning
Published: 1 August 2017

The political landscape over the past year has undoubtedly impacted global business appetite for M&A transactions, particularly as the Brexit process gets underway. The latest analysis from Deloitte’s M&A Index 2017, however, shows that M&A activity between the UK and the European Union has more than doubled in the first six months of this year, with French and German companies being highly acquisitive in the UK market.

As the inclination towards M&A activity begins to grow, CFOs must understand how their businesses can effectively plan for these transactions, and equally maintain day-to-day business performance as deals progress.

Preparation is key
Large conglomerates are acquisitive by their very nature, keen to bring on board the best technology, talent and tools to gain a competitive edge. As a result, businesses– and even more crucially, the finance functions within them – must consider the avenues to acquisition success and how to plan effectively.

All businesses will have multiple dimensions to them – their locations, either domestic or global, customers, products and lastly, the actual business function. Each of these must be considered within an organisation’s overall performance, and will assist the executive team to make strategic business decisions pre, mid and post-acquisition.

Taking the data from each of these areas and mapping it into a simple, visual analysis model is a crucial part of helping the new organisation function well, and quickly. Equally, the acquired business should ensure that all historical data is correct and well structured, in order for the acquirer to smoothly consolidate plans and results for the newly merged business.

Each of these data elements will assist in smoothing out the transaction process, but true financial planning must also be considered here. Having a realistic medium-term plan from day one of the deal will help with the target-setting process for the new organisation, as it will act as a baseline of what is achievable once the businesses’ performance is combined.

Business as usual
It is vital for the acquired entity to maintain the day-to-day running of the businesses during any transactional change, but it is even more crucial during M&A activity to demonstrate to clients and other stakeholders that the business will continue to perform effectively.

Ideally, a business will adopt a dual team structure during this process – one to ensure that the acquisition runs smoothly, and another to keep the organisation going. To assist both of these teams, businesses should consider implementing an agile analytics solution that is able to incorporate data from multiple systems – i.e. both the acquirer and acquired organisations – and ensure that business remains as usual once the transaction has completed.

Maintaining confidence
Confident CFOs are the bedrock of any finance function – however, it can be difficult for CFOs to remain confident during a period of political, economic and social uncertainty. Nothing addresses confidence more than being able to access clear predictive trends for future performance and analyse ‘what if’ scenarios. With this capability, CFOs are able to plan for any challenges on the horizon.

Merging with another business, or indeed being acquired, is a large event with an organisation’s corporate lifecycle, and often presents a different type of uncertainty – one that is only resolved once the acquisition decision is actually made. After this exit strategy is decided upon, it is up to the CFO and the finance function to deliver a solid financial plan and take the business through the transaction and into the new organisation.

For more information please visit www.metapraxis.com