The Role of a CFO in Mergers & Acquisitions

, | September 20, 2022 | By
The Role of a CFO in Mergers & Acquisitions

3 Things a CFO Does During the M&A Process

If you're new to mergers and acquisitions, virtual CFO services can be helpful no matter how you collaborate with them. After all, it's a whole new world (cue the Disney music). But in general, CFOs make the biggest impacts in three core areas: 


1. Advise on key financial decisions.

Mergers and acquisitions are just like any other transaction in that there are two sides: buy-side (buyer) and sell-side (seller). Depending on the part you're playing, virtual CFO services can support you in unique ways.

Sell-side, a CFO works to serve the seller's interests, which includes being forthcoming and providing potential buyers with reliable information about the company's data and operations. Virtual CFOs on the sell-side do the hard work to not only understand the seller's appeal to acquirers but also to uncover any weak points of a potential deal.

Buy-side, a virtual CFO looks out for their buyer, figuring out how and why the new investment could be valuable. Specifically, they map the integration strategy for the two sides to get an idea of where the combined business will be headedrevealing what each side stands to gain by working together.

Regardless of the part your virtual CFO plays, their job might include a certain degree of information discovery. Throughout this process, they'll take the time to prepare relevant documents, including:

  • Financial statements

  • Budget and sales projections

  • Tax returns 

  • Capital structure and capitalization table

  • Employee data

  • Fixed and variable expenses

  • Equipment and inventory valuation

  • Cybersecurity compliance

CFOs are invaluable assets, doing the legwork to gather information, brainstorm a timeline for operational and financial goals, and provide a clear sense of direction.


2. Manage potential risks

If your business is on the buy-side of an M&A, you're taking a leap of faith in starting a new chapter. You need a partner to manage any risks that may impact the transaction. Your virtual CFO can dig into factors such as pricing expectations, value add, and risk through a combination of both qualitative and quantitative research that'll show corporate stakeholders the bigger picture.

Will a target transaction work out? Virtual CFO services vet acquisitions and assess details about the business and its potential for success. This starts at a basic level with looking at financial statements to assess the target's gross profits and rate of return but involves so much more, including: 

  • Examining accounts receivable (+aging)

  • Analyzing inventory and its value

  • Appraising properties and fixed assets

  • Comparing past forecasts against actuals

With the basics in handand if a deal is likely to be beneficialyour CFO can continue to help you make sense of the deeper financial details of the M&A. Taxes are a major factor, and you should know local and federal tax implications of the deal and be able to examine the target's tax records for more business insights. And let's not forget about debt, either. Your CFO will analyze the target company's debt profile, ensuring you aren't biting off more than you can chew.


3. Integrate financial processes for each company

The biggest part of figuring out how to bring two companies under one umbrella is the integration plan. Your virtual CFO services partner will create a comprehensive integration plan and determine who's responsible for carrying out the plan to set the partnership up for success. The process looks a little different for every company, but may include:

  • Defining performance metrics

  • Assessing for potential synergies

  • Creating forecasts 

Key leaders have a voice in integration discussions too, providing insights into how to interweave synergy targets into existing financial processes. Your CFO leans on them to provide information to guide decisions about financial and operational engineering, monitoring progress along the way.

Of course, even the best plans might require you to pivot. If a system isn't delivering results, your virtual CFO needs alternate ideas to combat holdups. As a result, they may try to course correct and hold training workshops for the newly formed company, developing new approaches and ensuring employees understand goals and expectations.


Dive into Your M&A with Virtual CFO Services

Whether you're on the sell-side or buy-side, mergers and acquisitions have countless moving parts that virtual CFO services are perfectly positioned to handle. Trust your virtual CFO as an advisor, risk manager, and integration strategist who knows the right ways to get your deal doneand done successfully. 

Need a virtual CFO team to manage your next M&A adventure? Ignite Spot can help. Explore our outsourced CFO services and get in touch to discuss your needs.

Strategic growth opportunities should be available regardless of your company’s size.