Mergers are up. So is the need for temporary workers in the finance department — especially those with industry-specific expertise and merger-related experience. Financial managers who adopt a strategic approach to filling short-terms staffing needs can further the merging organizations' business goals.
Over the last decade, flexible staffing has become a way of life. Virtually every department within a typical corporation, including finance, has come to depend on temporary and project-based labor to manage the inevitable swings in workload. Yet, when a merger or acquisition is underway, the idea of using temporary professionals eludes some senior financial executives who are so engrossed in merger-related activities that they may lose sight of short-term staffing needs and possible solutions. "A merger is among the most difficult and stressful of all corporate events. It's a time when flexible staffing makes the most sense," says Mike Davidson, an executive vice president for Gemini Consulting of Morristown, N.J.
Today, there's no shortage of stress. And there's no shortage of mergers either. According to Newark, N.J.-based Securities Data Co., which tracks mergers and acquisitions (M&A) worldwide, M&A activity through the first nine months of 1997 exceeded $1 trillion, compared to $791 billion for the comparable year-ago period. For all of 1996, announced M&A volume worldwide was more than $1.12 trillion and involved more than 10,000 companies. In almost every instance — whether the firm is among the fattest of the Fortune 100 or a hot startup — it's the finance department that's typically charged with managing due diligence and scrutinizing assets. And, increasingly, financial and accounting experts find themselves overwhelmed.
"Professional staffs are thinner, but demands are greater than ever," explains Daniel J. Weinfurter, president of Current Assets, LLC, a Chicago company that provides project management consulting and professional staffing solutions in the finance arena. "In order for a merger to succeed, a company must have adequate expertise and be able to pay close attention to all the details." Unfortunately, most accountants, auditors and tax experts are so buried in their daily tasks, they are unable to devote their full attention to a merger or acquisition, he says.
In the finance department, where specific skill sets are needed at specific times to navigate through the choppy waters of a merger, a lack of resources can prove devastating. But it isn't only a matter of bringing people in to plug openings and address the workload. "It's essential that a company take a strategic approach," explains John A. Challenger, executive vice president of the Chicago outplacement firm, Challenger, Gray & Christmas. "Almost all mergers result in job displacement. People are laid off, people are hired, entirely different skills are required during the transition and in the new company."
That might sound like a situation best left to human resources to handle. But, more often than not, finance must find ways to create new efficiencies and synergies. As Davidson puts it, "The ultimate goal of a merger is almost always to cut costs. The paradox is, it takes extra work to get there."
Putting the new organization's finance department on solid ground in terms of staffing requires the following actions:
- Recognize staffing needs created by the merger. Weinfurter notes that the vast majority of mergers are strategic in nature. They are designed to help companies grow through greater efficiencies and synergies, and involve almost every sector of the economy. When a merger takes place, the effects ripple throughout the organization. "Regardless of the incentives in place, the tendency is for key people to leave — particularly in the company being acquired," he says. That can create a knowledge vacuum at the top, and can seriously impair the new organization's ability to make effective decisions.
But it's not the only staffing problem finance faces. The due diligence process requires specific expertise — additional auditors, tax experts, even high-level experts such as assistant controllers — who can handle specific tasks or understand the big picture of how the organizations must fit together. In many cases, the need for such positions is temporary and hiring additional staff or reallocating personnel would prove expensive and disruptive.
Mark Rohde knows that fact well. The vice president of sales accounting at Abitibi Consolidated Sales Corp. in Greenwich, Conn. turned to professional financial staffing during a recent merger between Abitibi-Price and Stone-Consolidated. The Montreal-based company, with revenues of $5 billion Canadian, has used accountants, general ledger specialists and an interim accounting manager to assist with the enormous workload. "With management and staff devoted to merger issues, there's a void that occurs, and it's difficult to get all the regular work done," he says.
On top of all that, Abitibi opted to close a Chicago office and consolidate staff in Greenwich, Conn. — a process that took over a year to complete. "We had open positions in Chicago that were difficult to fill because they were only going to exist for a few months. We also had open positions in Greenwich on a temporary basis as we built up the department there." Using staff from a temporary agency, Rohde was able to smooth over labor problems and complete regular assignments as well as merger-related activity.
Finally, there's the growing challenge of integrating technology within merging organizations. In most cases, information technology (IT) must meld hardware, software and actual data — including the finance department's general ledger and various AP and payroll systems. "It requires a high-level evaluation to determine which system is best used to run the company, and it takes people to make the needed changes," Weinfurter explains. In fact, he points out that IT professionals are among the most highly sought workers during a merger.
Traditionally, the consultant approach has been more popular. Companies have hired lawyers and accountants to handle specific needs. The advantage of this approach is that it allows a company to outsource certain functions and tap into outside expertise. However, in today's business environment, staffing issues are becoming more complex and many firms are gravitating toward the professional staffing model. When a company already has a strategy and specific objectives in place, the latter approach often pays dividends. It allows the company to maintain control yet tap into knowledge and expertise. "Today, it's not unusual for companies involved in a merger to use professional financial staffing all the way up to the controller or CFO level," explains Cecil Gregg, an executive director at RHI Management Resources, a division of Robert Half International, in Menlo Park, Calif. "It's key to get the right people involved at the right time. Many mergers fail, and it can sometimes be traced indirectly to the finance department. If the reporting capabilities aren't there and the entire organization isn't on the same page, things can go astray."
Not only is it important to weigh a candidate's qualifications, it's a good idea to question a staffing firm about a person's specific experience with mergers. "You want someone who is familiar with your industry and understands the nuances," he explains. "A background verification and checking how a person performed in a similar scenario and what they were able to accomplish are the best indicators of how they are likely to perform at your company," he notes.
At senior levels, it's important to find an interim CFO, controller or consultants who have experience that relates directly to the company. "A $50 million startup that's being acquired requires entirely different skills and knowledge than a $10 billion merger of equals," says Gregg. Although temporary accountants, auditors and tax experts don't need the same level of experience to do their jobs, it's smart to ensure that they have some familiarity with the unique challenges and problems that often arise.
Yet, due diligence is more than the sum of balance sheets and assets. Increasingly, it means finding experts who can address specific concerns that could arise as a result of a merger. "Because IT drives today's finance department, it's becoming more important to understand the technology that you're acquiring," says Davidson. "You don't want to merge systems and wind up with incompatible software or inherit a Year 2000 problem that brings everything to a screeching halt. It's essential to know up front what the situation is."
All too often, he says, IT professionals in merging organizations aren't familiar with the other's technology and are so busy maintaining their own systems they simply don't have time to put all the pieces together.
To be sure, combining budgets, general ledgers, payroll systems, reporting software and disparate AP processes from two corporations can become a headache of epic proportions. Gemini Consulting has found that 50 percent of all companies fail to maintain their book value two years after a merger. "The companies that succeed are those that manage the process effectively, and view their workforce as a strategic element," says Davidson. And, more often then not, that means looking inward for answers and outward for staffing.