M&A from a CFO’s Perspective Session 2

In the grand scheme of things, every M&A must make financial sense. Whether it’s cutting cost, increasing revenue, or achieving operational efficiencies, it all boils down to the numbers. After all, every company’s main goal is to grow and increase profit for its shareholders. It is why the Chief Financial Officers play an integral role in M&A. In this article, we will explore M&A from a CFO’s perspective, featuring Samuel Wilson, Chief Executive Officer at 8x8.

“You (as a CFO), need to make sure that the money you allocate inside of a company is in line with the people you have and the vision you want to have.” - Samuel Wilson 

The Role of CFO in M&A

The main role of a CFO is to be a strategic advisor to the CEO, deciding the best use of capital, at any given moment, inside a company. Because of this, they play a crucial role in the hierarchy of deal approval, as M&A is not always the best use of resources, depending on the buy plan.

This is where integration budgeting comes into play. CFOs incorporate the integration costs to  create the buy-or-build analysis, helping the company make informed decisions on whether or not to pursue a deal. According to Samuel, integration budgeting should never be done separately, and M&A should be viewed as an extension of what a company is already doing. 

Upon deal approval, the CFO is responsible for determining the worth of each acquisition. Their primary goal in M&A is to seek financial return on their investment, while adjusting for risks. 

Working with the M&A team

The CFO must be involved immediately when there are potential deals because they create a set of assumptions to make financial sense out of the transaction. When the company has decided to move forward with the deal, these assumptions must now be communicated to the entire team to ensure alignment and increase chances of success. 

The CFO is responsible for setting up the framework for the entire team to ensure that the assumptions are met. This includes who's going to do what, how it will be done, and how the progress will be communicated.

Advice for CFOs

According to Samuel, there are two crucial factors in every M&A: the price paid and the ability of the acquirer to operationalize the acquisition. It is essential to make decisions without emotions, following a disciplined and structured approach. Numbers don’t lie and CFOs must be the arbiter of truth in any company. 

When working in M&A, collaboration is key to success. Whether working with the CEO or the corporate development team, everyone must be aligned with the strategy and the deal rationale.