22 . 03 . 2021
EXPERT'S VIEW The role of the CFO in mergers and acquisitions - has it changed?
22 . 03 . 2021
- FORDATA: In your opinion, how have the competences and the role of CFOs changed in recent years in conducting such processes as mergers and acquisitions?
- Are CFOs able to take over the competences of investment advisers today? To what extent?
- And can we talk about a trend in this field appearing during the pandemic?
Financial directors have faced the big challenge of managing company’s funds in the uncertain reality caused by the coronavirus crisis. Even more, they have to constantly look for new investment opportunities and make strategic decisions related to the company’s adaptation to the changing market. Does this situation require CFOs to take over some responsibility and develop competences of investment advisers, especially in the context of mergers and acquisitions? What is the role of the CFO today?
We asked Łukasz Meissner, Managing Partner at theCFO, member of Association of Chartered Certified Accountants (ACCA) and the Institute of Interim Management (IIM), for his opinion.
FORDATA: In your opinion, how have the competences and the role of CFOs changed in recent years in conducting such processes as mergers and acquisitions?
Łukasz Meissner: Analyzing the competences of financial directors in M&A processes, at the beginning I would distinguish the context of selling an enterprise, assets or shares from the acquisition of another company. Here, I would like to focus on the first of the contexts.
When selling a company, M&A competences should be considered in the context of analyzing the company’s sales process, which in short will include such activities as: preparation of marketing and information materials (information memorandum, teaser), roadshows and presentations of the management board with investors, dealroom preparation, Due Diligence research, Q&A with investors and their advisers, negotiating the purchase offer and transaction documentation, as well as transaction closing procedures including debt restructuring, which may be closely related to closing procedures.
From my personal professional experience (as a former CFO and a transaction advisor for eight years), I can say that most CFOs have not had contact with M&A processes, only some have had one-time experience with it, and a handful have participated in M&A transactions more than twice.
If we consider the next advantages of VDR, i.e. streamlining and accelerating the sales process, the picture of the benefits for the entrepreneur will improve even more. The reduction of time needed to comple a transaction directly means saving of energy, wages, etc. The environment gains directly and indirectly automatically.
Are CFOs able to take over the competences of investment advisers today? To what extent?
It seems that the competences of CFOs in the field of holistic management of the M&A process have not changed significantly in recent years and it will be difficult for financial directors to replace transaction advisers or other members of the company’s management staff. The financial director still works in sections, especially in such areas as, for example, preparation of a virtual data room, Q&A with investor’s advisors as part of due diligence procedures or debt restructuring as part of closure procedures. In terms of other areas of the transaction process, other managers in the company being sold or external advisers seem to have more appropriate competences.
For example, information materials about the company should contain strategic information (e.g. business plan, market status and trends, market shares, competitive advantages and barriers to entry), organizational and HR (e.g. organizational structure of the company, key managers and employees, key competences) or regarding the portfolio of products and services offered by the company. In this case, the company needs a whole team of people with different competences, who will together create a high-quality and informative information material about the company – one that will interest investors. It will be similar in the case of negotiating a purchase offer or transaction documentation – apart from a lawyer experienced in M&A transactions, the most decisive and best-informed people in the company are necessary, especially the CEO and shareholders.
And can we talk about a trend in this field appearing during the pandemic?
The transaction/investment advisor on the one hand, and the investors and their advisors on the other still remain the binding agent of the transaction process. The advisor manages the M&A process from the technical side, acting as a project manager. Nevertheless, I see a much more important role of a transaction advisor (who often has several or even several dozen M&A transactions behind him) in the soft spheres. Let me indicate just a few examples of competences – the advisor shares his knowledge / experience with the client and educates the client, and thanks to his network of contacts, he also acts as a business intelligence agency. The advisor is also a prudent negotiator on behalf of the client, identifying as early as possible the “deal breakers” for which he finds the most appropriate solutions. M&A transactions are, to a great extent, also focusing on the relationships and emotions of the parties – many transactions fail due to the lack of relations or controlling emotions of participants in the process – and the role of the adviser is to ensure the best possible relations between the parties and a good climate of cooperation, and in crisis situations – averting smoldering conflicts. In conclusion, I do not see any new trend that would indicate the growing role of the CFO in the M&A process. COVID-19 does not have a major impact on the role of the CFO in M&A processes – the CFO still remains an executor (contractor) in the preparation of financial, tax or legal materials, data room administration and due diligence coordination.
The role of the CFO is very important when deciding whether to sell or acquire a company, as well as when analyzing historical financial data and business plans: nevertheless, this competence has been, is and will most likely remain the domain of a CFO.
Thank you for your insight!
More information about the M&A market in Poland can be found in our quarterly report Mergers and Acquisitions in Poland – analysis of Q1 2021 will be published on April 9, available for download on the FORDATA website
Report: Mergers & Acquisitions in Poland. Deal descriptions, sector analysis, comments by experts from FORDATA and Navigator CapitalVIEW NOW VIEW NOW Report: Mergers & Acquisitions in Poland.
Did you like the article?
Do you want to exchange knowledge or ask a question?
Write to me : Krzysztof Pytel page opens in new window
01 . The war in Ukraine and its repercussions
The unprovoked full-scale invasion of Ukraine launched by the Russian aggressor on 24 February 2022 has had tremendous local and global repercussions in all areas of life.
02 . Private Equity in the CEE - Hinting at Possibilities in Near Term by Driving Innovation and Inclusion
Sourabh Biswas at OakNorth Bank writes about the latest revelations in the global and European PE/VC market. How is private equity in CEE?
03 . Why is it worth investing in a professional VDR?
Investing in the purchase of a business is a risky undertaking. Therefore, it is extremely important to have a group of advisers by your side who will support a…
04 . Romanian market in 2022 - M&A and the domestic specificity
Romania is among the CEE region’s fastest growing economies with an estimated GDP growth rate of 4.2% in 2022. In 2021, the…
05 . ESG: A new Framework in the Making - New requirements and how they (probably) fit into each other
Sustainability and activities aimed at reducing the carbon footprint are currently at the top of the political agenda in virtually every major ec…
06 . Good practices in the field of compliance - what fintechs can learn from traditional financial institutions
Aleksandra Kopeć focuses on compliance and points out the differences between their application in traditional finance and fintechs.
07 . Germany's Transparency Register - what does it mean to companies?
Dr. Jan J. Kruppa explains how EU AML Directives apply to German law and what new regulations bring to the local entities.
08 . PE/VC funds' activity in H1 2021 - The USA and the EU
Harmeet Dhiman takes a look at PE/VC activity in the United States and Europe. How is it after the first half of the year 2021?
09 . What are the challenges of the FinTech industry?
The challenges of fintech are not just online security. What is fintech after the pandemic like, explains Aleksandra Kopeć, financial lawyer.
10 . The role of the CFO in mergers and acquisitions - has it changed?
Financial directors have faced the big challenge of managing company’s funds in the uncertain reality caused by the coronavirus …
11 . Audit during the pandemic - how has it changed?
The epidemic has had a significant impact on the economy and the functioning of companies, therefore its effects…