Once a business has been acquired, the owner and C-Suite have significant responsibilities for the cultural assimilation of the new team in the acquiring company's existing team.
Matt Lyon, Chief Corporate Development Officer at TalentLaunch, speaking at the recent Cleveland Smart Business Dealmakers Conference, has been in the CFO chair for numerous acquisitions over the past decade. He puts the CFO's post-acquisition responsibilities in two buckets: cultural, and operational/tactical.
"Culture is a big thing that we look at and try to make sure that we're acquiring something that matches us," Lyon says. "But you never quite know. You don't get to talk and work with everybody in the organization."
Something he says the acquiring company owes all of the newly acquired employees is candid conversation.
"This is something we had to learn the hard way," he says. "I remember the first acquisition we did. We made the classic mistake of saying, 'Don't worry. Nothing's going to change. You guys are doing great. That's why we bought. Nothing's going to change.' And then over time you realize you just rocked their world when you came in and said, 'Well, the old owner that you might have worked with for 10 or 20 years is gone and there's this new group of sheriffs in town."
In the wake of an acquisition, Lyon says employees are worried about their paycheck, their job, if their benefits are changing. All that should be addressed up front because as they wonder what's going to happen with the organization, they're often not as focused on growing their revenue and running their operations smoothly.
"We have a very important role to make sure that we control and manage that as best possible so that they don't forget why you're in business," he says.
Resilience Capital Partners Co-CEO Bassem Mansour has bought and sold many companies in his career. Something he considers when making an acquisition are the circumstances of the business, which in many cases will drive the skillset they're looking for in a CFO. A turnaround of a more industrial oriented business, for example, is very different than a buy-and-build strategy of something that's more service-oriented or asset-light.
"We think about, A, what are the circumstances of the business, and, B, what's the right style of the CFO?" Mansour says. "So, on the one hand, one that's a little bit more operationally oriented that collaborates well with operations and engineering and various areas like that of the business versus one that might have a lot of talent around things like HR and IT and integration. So, we try and tailor the skills that we're looking for based on the circumstances of the business and what the objectives are over typically the next two, three, four years."
Truist Bank SVP of Middle Market Banking Andrew Rutherford, coming from the banking and lending side of post-acquisition integration, says there are two main topics that come to mind: treasury management integration and financial reporting.
Once the money transfers for the sale, he says the focus from the banking perspective is on treasury management integration, which the CFO often spearheads, working with treasurers, controllers and AP/AR managers to work through that process. Facing the CFO in this situation is the go-live date, which is typically 90 days post close. Ahead of that, all of the banking relationships from the acquired company need to roll into the existing banking relationships of the acquirer.
Lyon says there are some lessons he's learned there. With the first couple deals, he says they didn't pay attention to it and then realized that the customers of the company that was acquired continued to pay to an old owner's bank account. After the second deal, he says, they started putting into their purchase agreements that their company controls the cash.
While clearly the acquiring company wants all the cash from the acquired company's customers to go into its bank account, it doesn't always happen that way.
"When you walk in there on Monday, day one, when you own them, customers don't know you own them," Lyon says. "They still got their payable system setup to remit cash and ACHs to an old bank account. So, there is — I don't want to call it a fire drill — but there's a very heightened sense of urgency to get in front of those customers, let them know that the remittances have changed, the treasury management piece has changed and where you need to send that money to has change. One of the strategic things we did was we put that into every purchase agreement now so that there's never any argument between the old owner and their management team and ourselves about where this money really should be going. We put in there where it goes, and then we also put in their a mechanism of when we reconcile it and remit it to each other."
