The Nine Merger "Musts" for CFOs

Mergers are long, complex processes ranging from pre-announcement planning and due diligence to deal close and postmerger integration. For CFOs, these transactions can be particularly onerous, with important multiple responsibilities including closing the deal as well as combining the two finance organizations and supporting other functions' integration efforts.

Our experience has taught us that there are nine things the CFO (and the person leading the finance team integration) must do:

• Clarify the charter. Before developing an integration plan, a CFO needs to understand the degree of change a merger will create and to what extent the role of finance should change and is expected to change. Does merger success require a new and different approach, such as an entirely different set of reporting standards and metrics (for example, a shift from a product-driven company to a service-based strategy)? Or, is finance being asked simply to integrate quickly and efficiently?

• Create a game plan for internal and external "clients." If business managers' roles and reporting structures change as a result of the merger, then finance likely will need to change as well. External investors, too, may have different expectations because of new strategies or new jurisdictional requirements, or simply because of size. Lay out your aspirations for serving clients and the implications for planning.

• Create linked integration plans. Planning an effective merger transition is a matter of getting from day one to a desired end state. Work the day-one stability and the end-state plans in parallel and then identify the major transitions in between. Clarity around transition states -- finance and the businesses being supported -- will help to create linked integration plans.

• Plan to capture value, not simply identify it. A common trap is to spend a lot of time identifying cost and revenue benefits and then have them disappear into an untraceable P&L morass. Identify very specific synergy tasks and responsibilities and then set up to track them as projects, not just as P&L impacts.

• Decide whether to build a whole new team or augment what you have. The degree of people change needed is linked to the degree of strategic and operational change articulated above. In addition, differences in the approach used by the two finance groups (for example, is one a shared service and the other embedded in line organizations?) will help to determine what new roles, new skills, and culture changes are needed.

• Stay control-focused. Because finance serves as a critical company resource during any integration, staying focused in the midst of a transaction is a challenge. In addition to maintaining stability while transitioning finance processes, be assertive in looking at other functional teams' integration plans for stability risks as well.

• Carefully orchestrate the balancing act of closing. Closing a major transaction while also doing integration planning can exhaust everyone involved -- especially support functions. Divide and conquer. Your most senior people don't really need to be involved in everything. Many finance integration execution tasks can be delegated, preserving your wisest heads for design and strategy work.

• Mind those devilish details. To successfully execute an integration plan, you need to define its elements at a granular, task level, understanding the interdependencies across all functions. In most cases, finance inherits the postclose tracking task, so it is in the team's interest to be deeply involved in how preclose program management is set up.

• Lead the way. Finance touches every corner of the organization and is ideally positioned to understand the implications of integration changes and to anticipate operations and culture problems. Look for the subtle "hot buttons" that could undermine success now or in the future.

Sticking to our merger "musts" for finance organizations is not a guarantee of merger success. No such guarantee exists. But by paying attention these key areas, you can give your organization the very best chance for a positive outcome.

Now watch Gerald Adolph explain what CFOs need to know before executing a merger at www.bfmag.com (Sept. 20, 2007)