Shifting economic conditions are changing the deal environment. Faced with slow growth, tight credit, and general uncertainty, many companies are proceeding with caution. Although deal volume remains high, the size and nature of the transactions is changing. Today's deals tend to be smaller, and there are fewer megadeals. Also, most are strategic in nature, rather than the leveraged, financial deals we saw last year.

Caution is good if it makes you more disciplined and thoughtful in how you identify and assess a given transaction. But it's a problem if it prevents you from doing the deals necessary to execute your game plan and accomplish your strategic objectives.

If you aren't doing a deal, perhaps you should be; it could be a good time if you are positioned well.

But not just any deal. Whether you are contemplating an acquisition, divestiture, or recapitalization, here are three questions every CFO should be asking:

• Why are we doing this deal?

  Whether you are in the middle of a transaction or just thinking about one, this is the first and most important question. And while it sounds obvious, it's worth mentioning because companies often forget to ask it. In many cases, the question gets asked only once — at the start of the deal. After that, momentum quickly builds and the transaction takes on a life of its own. Question the rationale throughout the deal as you learn more, not just at the outset (when your people are least informed). What was the main reason for pursuing the deal? Revenue growth? Complimentary products and services? Industry consolidation? Geographic expansion? Defending yourself against a competitive threat? And now that you've had a chance to dig into the details, does the initial hypothesis still ring true? You're not trying to hold things back. You just want the business to move forward in the right direction — and to keep a sharp focus on the end game.

• How can I position the business to capitalize on opportunities?

  A tight credit market and slow economy create a wealth of buying opportunities for companies that are positioned to take advantage of them. It's a buyer's market — but only for buyers with good credit reserves or a big war chest. Consider pruning your debt to improve available leverage. Or maybe work on cash flow by streamlining your company's operations. These actions will help your company to be ready to move if and when the right opportunity comes along. This might also be a good opportunity to evaluate your current portfolio and size up divestiture opportunities.

• Is our vision of the future still valid?

  Strategic deals can take a long time to complete — and a lot can change in the interim. Don't assume that the future will be a linear continuation of the past and present. Otherwise, you could find yourself buying a buggy whip business just as customers are shifting to automobiles. The same is true for divestitures. Although you may be anxious to unload a business that isn't pulling its weight — particularly when times are tough — you might get a much better price if you wait for conditions to improve. Understanding the full range of future scenarios, and how they are changing, is critical to making the right choices.

These are important questions for every deal, no matter what the economy is doing. But they are even more crucial when times are tough because there is less margin for error. As a CFO, you need to maintain a healthy skepticism to help keep your company from wasting its money. But you also need to be an advocate for growth. Walking that tightrope is key to achieving financial success from a deal in difficult times.

Now watch [1] Ken Horner discuss best practices for managing M&A deals in difficult economic times.