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Joe Feldman
Authored by Joseph Feldman

This article is the second in a 3-part series dedicated to acquisition strategy, and authored by Joseph Feldman, President of Joseph Feldman Associates. 

Working on a potential acquisition demands specific functional competencies, though also meeting a team’s requirement for intensity, coordination, trust, and candor.  For a company, it is perhaps the ultimate occasion for a top-tier team of internal and external experts.

However, as reported by one middle market executive, “It is easier to identify the people and expertise required than it is to engage them in the task, as they usually have other full-time job responsibilities.”  And in the case of a potential transaction where time is of the essence (e.g., a competitive bidding situation), one investment banker cautions that “[A] buyer’s internal staff already have full plates and have a hard time re-allocating their time to accommodate the fast pace and intensity of an acquisition transaction.”


What are the essential responsibilities that a
CFO must consider in fielding an acquisition team?

“Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishments toward organizational objectives. It is the fuel that allows common people to attain uncommon results.” Andrew Carnegie

With required deliverables and analyses as diverse as listed below, a CFO is likely to rely on a combination of internal and selected external resources to support acquisition efforts in their purview.

Team Formation Schematic 1

And any particular acquisition will bring additional expectations with one-of-a-kind peculiarities beyond the broad brush listing above.


Success drivers for a CFO’s management of
an acquisition team

Of course, assembling a competent team and getting the jobs done are baseline expectations for an acquisition campaign, as with any substantial and complex project.  In the case of acquisitions, four particular success drivers merit a closer look, each focused on aspects related to process management.

Preparing for a highly iterative process

The workflows associated with acquisitions may be viewed in isolation and as having a clear beginning and end. Such an approach would ignore that realities of the interconnections among all activities related to successful acquisitions, for example:

  • Identification of risks identified in due diligence may be considered in the negotiation of the seller’s representations and warranties
  • Interactions during negotiations with seller’s management may inform areas of cultural alignment or potential mis-alignment that will be faced in integration… or could/should kill the deal
  • Operational reviews of the target company may reveal superior capabilities and people, prompting reconsideration of integration plans and deal value
  • Engaging external advisors to support diligence may identify areas of new potential risks or opportunities based on their previous work with comparable transactions.

And so the traditional CFO deliverables cited earlier may prove far more informative than simply a confirmation of facts.  They could deliver essential insights for negotiation, integration planning and non-finance diligence.  And conversely, efforts seemingly unrelated to finance may prompt a relook at, for example, projected synergies, legal exposures, tax planning and more.

Reckoning with risk and uncertainty

While certain acquisition-related analyses are conducive to black-and-white diligence (e.g., was a tax return filed, is there an IRS audit pending, have the financials been audited), many aspects of a potential deal will involve more subjective assessments of risks and uncertainties.

  • Access to information may be limited
  • Access to key employees and customers may be denied
  • Lack of familiarity with a target company’s products, markets, and supply chains may be difficult to overcome

An effective CFO must remain mindful of such limitations, focusing resources on improving understanding of risks and planning for a range of potential scenarios.

Managing a mix of internal/external resources

While acquisitions considered by some organizations can be evaluated by internal resources only, in most cases the deliverables and analyses noted above (and inevitably others) will require a combination of internal and external resources.  Beyond obvious assessments of competence and availability, team members should be considered for their collaboration, candor, and discretion.

“Thorough diligence should include subject matter experts, which can be expensive.  Good acquisitions involve a broad diligence team and internal resources that will be responsible for managing the acquired business post-closing.”  Investment banker

Seeking input and insights among people diverse roles in the acquisition process

This includes for example team members focused on negotiation and others focused on post-closing integration.

  • Insights about a target company’s organization and culture may surface from a specific human resources assessment… OR through a due diligence team’s interactions with frontline employees in operations, accounting, or customer service
  • Insights about how a target company treats its customers may arise from a review with sales leadership… OR through accounting reviews of past due accounts, production rework levels, or third-party analyses of the company’s in-market reputation
  • With a bias towards sharing information among a range of participants in the acquisition process, numerous go-forward decisions can be better informed. These would include decisions to process or not with a deal, decisions regarding organizational/cultural planning, and risk assessment for achievement of planned synergies

Avoiding the false certainty of quantification

Many corporate executives believes that the risks and uncertainties of an acquisition are inherently quantifiable, and therefore might look to the CFO and their team to provide “facts” supporting important risk assessments. Our research suggests, however, that such insistence on quantification may lead to an inappropriate sense of certainty.  Rather, some risks may be better discussed qualitatively, whether through discussion of scenarios, “what if’s”, or sources of known unknowns.  The CFO’s leadership of their acquisition team can set the expectation for openness for how analyses are presented to ensure that the insights and uncertainties of the team flow throughout to decisions through an acquisition process.

 Joe Feldman-058945-editedAbout The Author

Joseph Feldman is president of Joseph Feldman Associates (www.josephfeldman.com), a Chicago-based corporate development consulting firm founded in 2003. The firm provides acquisition and other strategic transaction consulting for growing companies and their investors.

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