How CFOs enable M&A deals to happen

August 8th 2022 | Posted by Mark Masson

In 2021, M&A rates globally increased by 24% from 2020 and current evidence suggests that trends will continue on this upward turn throughout 2022 and beyond.

Senior finance professionals have a vital role to play in each acquisition that takes place. This includes determining the best means of financing the acquisition, ensuring the value of the target company is accurate, and enabling the integration of the new business into the organisation while monitoring the financial considerations and risks involved.

The role of a CFO includes actions taken in the lead-up to the acquisition as well as during and after the process.

CFO considerations concerning a target company

Top CFOs understand that they have a responsibility to ensure the valuation of a target company is accurate. This is vital in determining the price that a company is willing to pay for its target. This work also helps to identify any intangible assets and contingent liabilities that may not initially be obvious.

Further to value considerations, CFOs also have an essential role to play in identifying regulatory obligations and ensuring they are met.

CFOs and acquisition funding

The funding of an acquisition requires the consideration of several factors by the CFO. They are responsible for determining the most efficient and effective funding strategy in terms of the tax position and credit lines.

For example, the use of credit lines would not be able to breach any financial covenants that are in place.

Further to this, CFOs have a responsibility to understand how the acquisition will affect the liquidity and the risk profile of the acquiring company.

A CFO’s role in integrating the new business

The role of a CFO does not end with the financing of an acquisition. They also have an essential role to play as the new business is integrated into the organisation. CFOs are supported in this work by the finance teams within the company.

For example, the new business that has been acquired has to be implemented into the finance functions of the overall organisation including cash management, funding, and banking. Functions such as budgeting, forecasting, and regulatory reporting also need to be aligned across the business.

Further to this, a CFO is involved with determining performance levels and potential risks associated with the new business. This leads to further involvement with proposing steps to take to improve performance and bring it in line with organisational requirements. It also involves the ongoing reporting of risk and the measurement of the impact of the acquisition on the business in its entirety.

It’s clear that as the number of M&As continues to increase the role of many CFOs will evolve to have more focus on this area. It follows that top senior finance professionals understand the value of developing and maintaining their skills with regard to acquisition processes and of keeping abreast of the latest news and trends in the area of UK and global M&As.

If you want to find out more about this topic, join our FD network with in-depth videos on this topic – it’s free.