Finance organization in M&A times - Be proactive and protect the deal value

Yesterday, while running my regular 10km I thought about the integration projects I have been working on for different companies in the past. Do they have anything in common when it comes to the finance organization integration difficulties?

Each integration project I have been through is unique and has its own specifics, but most of them have relatively similar areas that are worth addressing.

The M&A project has an impact on the entire organization with finance heavily affected. At the end of the day, all business transactions are reflected in numbers & reports. There is also constant pressure on reliability and data correctness, compliance and ideally risk-free environment. Not to mention that risk of error increases disproportionately comparing to a standard and routine business as usual. In addition, there is a need to assess correctly all synergies assigned to a deal.

I listed the key focus topics to avoid integration failures. Some organizations dealt with the difficulties with excellence and these are really successful in the deal value delivery.

• M&A deal is just another finance project - it is not for sure and even well functioning finance organizations has difficulties to accommodate it. Standard finance organizations are usually not designed to absorb the M&A workload that is enormous. Despite the fact that for the most of finance staff it is completely unknown territory, I see very often that the management pushes only for the resources re-allocation without taking into consideration all aspects of this massive change.

• Lack of a detailed integration planning - this is a key prerequisite to be successful not only in the delivery of the integration effort but as well in expected synergies materialization. The very early creation of an integration plan helps to identify risks, brings management together and often reveals weaknesses within the organization that need to be mitigated.

• Unclear target operating model and leadership in finance - the acquiring company's management has to deal with this task ideally before Day1 and after the announcement and decide how the new finance organization will be structured and business numbers consolidated.

• Wrong set-up of the integration team (In-house M&A related resources vs. external contractors) - this is a common dilemma for many finance leaders. To be honest, there is no straightforward solution. My opinion is that not a single extreme works properly. If you rely only on your own resources, there are in principle, two risks. Firstly and to certain extend you jeopardize current standardized financial processes as you have to allocate the time of finance staff to the M&A related tasks. The second risk is lack of proper in-house M&A and integration knowledge and this will lead to learning by doing mistakes. On the contrary, if you rely only on external consultants your specific business procedures and knowledge will not be reflected properly in the integration process. And not to mention the fact that integration learning will go away together with external consultants and for more ambitious finance staff this is really demotivating.

• Unbalanced integration team - take both from in-house and externals. You certainly have some high-potentials in your well-built team who have ambitions and adequate knowledge to focus at least partially on the M&A project and for whom it will be an attractive way to advance their career aspirations. If you don't have them, you have a much bigger problem than you think :-) Complement the in-house financial team with external professionals bringing their expertise, best practices and helping you to avoid silly mistakes.

• Do not forget to retain your key finance talents - the anxiety and uncertainty are extreme during the M&A cycle and if you manage to retain and develop your best talents you are the winner.

• Spotlight on the communication - this sounds obvious, but do not omit that you deal with people. Insecurity & doubts create pushback & rejections.