Mergers and acquisitions are among the most disruptive and complex processes a company can undergo. The outcome of such deals can redefine an organization’s future, impacting everything from financial health to market position. In addition to the priorities of running the current business, leadership must adapt to new ownership requirements, manage unsettled staff concerned about their future roles and provide transparency to both the internal and external stakeholders.
A fractional CFO brings an unbiased perspective, prioritizing the best interests of the company, its shareholders, and long-term goals with no personal agenda, existing loyalties, or external pressures. This impartiality ensures that M&A activities are approached with a clear, objective mindset, reducing the risks associated with such high-stakes ventures.
There are numerous ways a fractional CFO can make a positive impact on companies pursuing M&A, bringing an outside perspective that centers around three imperative areas for the buy-side.
Objective Valuation and Due Diligence Coaching
Accurately determining the value of the target company is crucial. An experienced CFO can objectively oversee comprehensive due diligence, direct the Quality of Earnings work, and ensure all financial statements, tax liabilities, debts and other liabilities are fully assessed and promulgated. Failure in this area can lead to overpaying for a company, potential risks or financial missteps. The CFO’s neutrality helps in identifying the true value of assets and liabilities for facilitating fair and effective negotiations with buyer, seller and company leadership.
Fairly Balancing Stakeholder Interests
M&A transactions typically have multiple stakeholders. The conflicting interests of board members, shareholders, employees and sometimes external investors or regulators can create volatility that might impact the deal. A fractional CFO’s impartiality ensures that no group’s interests dominate the process, advocating for a solution that aligns with the company’s strategic vision and creates long-term shareholder value. This is particularly important when faced with tough decisions, such as whether to divest certain business units or restructure operations post-merger.
Post-Merger Integration
Post-merger integration is the true test of a deal’s success. Biases and personal interests tied to one of the merging entities could hinder objective decision-making, leading to inefficiencies or missed opportunities for creating synergy. An experienced fractional CFO is pivotal in ensuring that financial processes, systems, reporting structures and human capital are integrated seamlessly. This includes aligning budgets, financial planning and resources, as well as monitoring the performance of the combined entity to ensure that the integration is carried out in a way that supports the long-term financial health of the company, mitigating risks such as employee retention issues or loss of key customers. An impartial CFO also provides transparency in financial reporting, helping stakeholders understand the financial status of the new organization.
The ability to remain neutral and focus solely on the company’s long-term success allows a fractional CFO to make tough decisions that may be difficult for others who are more emotionally or politically invested in the merger. Additionally, a fractional CFO can be placed in or pulled out at any stage of the transaction, can help with hiring a full-time CFO, and requires no severance package upon project completion.
Jack McGovern is a SeatonHill Area Managing Partner with deep experience in private equity, health care services and technologies, FinTech, consulting, manufacturing and technology sectors. He has demonstrated expertise in high growth, crisis management, and increasing value for PE clients. With significant contributions to corporate boards, Jack is an outstanding leader with a proven track record of assembling, aligning, and motivating talent.
SeatonHill provides organizations’ financial leadership with a strategic and operational focus by placing elite CFO talent to challenge the business and contribute to operational decisions to achieve results. With its curated talent, its financial leaders guide small and medium-sized businesses through complex financial problems to mitigate risk and achieve organizational goals.
