This post discusses the 5 Ps that can help you make a deal for success.
Never strike an M&A deal in haste. Speed is important but advance preparation is even more so. Such preparation helps the prospective acquirer to move in early when opportunity knocks and still make a sound, profitable acquisition. Also, prepare to activate the two sets of synergies as soon as the deal is struck. You need to begin justifying the deal immediately and the sooner the synergies are harnessed, the faster they will start showing results.
While scaling, expansion and backward integration are great reasons to make an acquisition, meeting short-term goal like a profit forecast is not. During the speculative information technology bubble, several deals were forged only to eventually bankrupt the acquiring party. Instead, the CFO must ensure that the deal creates value for the consolidated business over a long term. He/she should co-create the renewed vision and strategy with the CEO remaining immune to both unjustified hopefulness and baseless pessimism.
If an acquisition does not cover at least its purchase and keep, it can do only two things: eat into the business’ own profitability or add to its debt burden. Before making the acquisition, chart out a clear plan of how its cost will be recovered and when the consolidation will start earning profits. Consider using innovative options like reserving some portion of the payout for when the consolidated business achieves certain targets. Not only does this help the business to avoid overpaying but also helps both parties to get on the same page.
One of the biggest fallouts of mergers is that key people feel insecure and jump ship, leaving a gaping void and causing obstacles to success. To avoid this, it is your responsibility to inform them about the most important aspects of the deal and resolve any lurking doubts right at the onset. Besides, actively involve every individual who will be managing important functions in the consolidated business. If they are involved and arrive at the same conclusions that the C-suite did, if they share a vision and feel accountable for delivery, they are more likely to give the post-merger setup their all. Once the merger is complete, define new responsibilities and hierarchical structures quickly and clearly, leaving no scope for ambiguity.
Back to your core competency; tackle the finance team integration challenge head-on. Start with fulfilling external reporting requirements; next, redesign your processes to establish a common structure throughout the organization; and, finally, tweak to make your redesigned financial function world-class.
Apply these 5 Ps, make well-calculated risks and strategize innovatively to lead your acquisition to sustainable success.