What to do when the CFO has little or no transaction experience
Case Study and background
Case Study?
We were engaged for a 12 month project to support the business to be ready for sale. Our FD worked intensively alongside the CFO to professionalise aspects of the finance function and manage the team. Understanding and presentation of last 3 years performance data across multiple business divisions and revenue streams was vital to underpin company valuations, even though little of that data was available before our work began. We strengthened processes, controls and systems, instilled confidence in the buyer, and an organised data room ensured due diligence was smooth. The business concluded a successful trade sale to its largest UK competitor at what was recognised by all parties as being at the top end of the valuation range.?
Why??
Like all professionals and businesspeople, CFOs progress through their career gaining experience along the way, moving up, sideways and along. But what happens when they are capable and respected in their role, the business is planning a sale and they have insufficient transaction experience??
Various scenarios ensue.?
The engagement above was a scenario where the FD had no transaction experience, so he had discussions with the transaction advisors (in this case Deloitte) and both concluded that, he was invaluable to the business and crucial for continuity up to the completed transaction but needed help from an experienced hand. The board approved the proposal from the FD and Deloitte and the case study speaks for itself. It is worth mentioning here that it was always planned that the FD would leave the business, post-sale, was deeply involved in the process, left with greater experience and a first transaction on his CV.?
The alternative??
The issue with the FD was discussed by the board and the decision made to proceed without additional support for the FD. Not having the appropriate skills in place to manage the financial due diligence, for example, often means the process is elongated, places significant risk to company valuation being eroded or even to the buyer abandoning. Provision of the support for the FD, clearly attracts cost, which there can be resistance to, but this must be seen in the context of not only expediency in the transaction, but also valuation, focus and disruption in the business.??
For trade buyers it is sometimes possible to get a very good price for the business when it is underprepared because the synergies, value of the customers, distribution, greater scale etc. have huge benefits, but even here the risks are the same as above. If the transaction is in respect of?growth capital or taking some money off the table to Private Equity, it is far less likely. There is a lot at stake for all parties.?
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?M&A advisors, CFOs, Chair, CEOs & Private Equity professionals?
If this resonates with you and you are a business advisor, M&A professional, CFO, Chair, CEO or Private Equity professional and are wrestling with this issue, we would be delighted to chat to you, we have a large team of consultant CFOs available for such engagements, with multi-sector background and available at short notice.??
Trevor Overall?
0207 717 5254?
Consultant CFOs: Projects | Part-time | Interim | Boutique Exec Search??