By Clive Hyman, Hyman Capital
So you’re the CFO of a business and you have been asked to help make an acquisition. However, thus far you have been left out of the loop with meetings having been held by the chairman or the CEO far away from your careful gaze. So how can you take charge of the situation and ensure that your unique view is included in the mix?
1. A project plan
It is tremendously important that you have a thorough understanding of the situation. Sit down with a pen and paper and force yourself to write down, in bullet point form, your understanding of the deal – which should include pertinent information such as which advisors have been involved. If you have any gaps in your knowledge, don’t be afraid to ask questions to your CEO or chairman. Once armed with all this information you should be in a position to create a project plan – outlining the steps involved and making sure you are informed at every stage.
It can be all too easy to try and do everything yourself. However, micro-managing is a sure fire way to crash and burn, and undoubtedly your work will suffer. Your job is to manage the whole whilst delegating each part – make sure you have someone in your team who you know and trust and work to create a fruitful working relationship that may even outlast the deal.
3. Face-to-face meetings
These are often forgotten in any business transaction, however the power of a face to face meeting is one of the most valuable resources in business. Hugely reducing the burden of work and costs of any transaction, in terms of time spent on emails and miscommunication. Having face-to-face meetings where possible will help create a far clearer and more open line of communication. Ideally, project meetings should be held at least once a week on any transaction to ensure a smooth turnover, and never be tempted to withhold information. Put your best foot forward, but be open, honest and approachable to guarantee a successful acquisition.
4. Due diligence
Before taking over any business you need to make sure that it is a viable proposition. Don’t forget to do your due diligence and bring in as many relevant experts as necessary to help support your understanding of the business. It’s advisable to instruct a lawyer. Ideally also instruct M&A experts to undertake a review. They should check that the business forecasts stack up in terms of market development, that the positioning of the business in the market and actual results to date are consistent, the forecast is consistently prepared, and that there is potential for room for growth in the market. Meanwhile, make sure you have a concrete budget in place for the business post transaction and that you are in frequent contact with your shareholders, stakeholders, and possibly, board to ensure they are kept informed.
5. Board paper
This should be co-written by you and the sponsor of the transactions to ensure that the business case, including the upside on the Earnings Per Share (if it’s a quoted business) are all articulated, the growth is measurable and clearly defined. This will help ensure the board is fully involved and informed , maintaining open lines of communication and creating internal alignment.
6. External advisers
Once you have achieved internal alignment it is important to make sure your external advisers are fully briefed and clearly instructed. The best way of achieving this is through sharing as much data as available – we would advise creating an online data platform where the appropriate individuals can easily access data electronically, remotely and in real time.
7. Action plans
These should detail the immediate strategies once the acquisition has gone through and how your team plan to develop the Key Performance Indicators, as well as a clear method of monitoring the business remotely which can be developed during due diligence. This plan should take into consideration both the last few years of trading as well as the financial forecast – helping to create a robust acquisition strategy which can support the business case.
8. Planning post-acquisition
This is easily forgotten, but tremendously important. You need to create an acquisition plan that details effective strategies for after the takeover. This should include ways in which employees, management and suppliers will be restructured and regrouped to work in harmony. Helping to smooth the transition process, it will mean each party has a precise and definite understanding of their role and can help prevent panic and confusion – both of which can be hugely demoralising and easily derail the best laid plans.
9. Budgets and forecasts – the business plan
The business plan must be developed for the acquisition vehicle and there needs to be a deliverable for the business that is being acquired. These will inform the discussions around employment, bonuses and feed into every aspect of the post-acquisition process.
In any acquisition it can be extremely tempting to grapple only with the bigger picture, whilst forgetting about the staff, management team and suppliers that make up the integral fabric of any business by which any company lives and dies. Make sure to have contracts in place with suppliers, managers and employees so they know their position post-acquisition and remuneration. Setting of the levels of remuneration needs to be handled face to face , and not by text ! This will help prevent any shocks or disappointment and create a level of stability that will be hugely beneficial during these turbulent times.
11. Completion statement
Make sure to carry out a trial run of what a completion statement would look like so that you fully understand the cashflows involved in the transaction as well as any accounting that might need to be understood. Expect the unexpected – because there will always be an element of surprise involved, so have a tax specialist and accountant involved at the earliest stages who are able to proactively deal with challenges as they arise.
12. Progress meetings
During the transaction you should have weekly progress meetings, and they need to be chaired formally and action point minutes produced. Make sure to have an acquisition meeting three months after the completion to ensure everything is in line and you are meeting your KPIs.
Clive Hyman FCA is founder of Hyman Capital Services