FROM EMPLOYEES TO THE CFO: WHY STRATEGIC PLANNING IS VITAL TO M&A SUCCESS
Julie Windsor, Managing Director of Talentia Software UK, explores the challenges attached to successful change management and the increasing importance of pre-acquisition strategy.
Many business leaders across the globe would agree that while not always popular, mergers and acquisitions (M&A) are a key component of the corporate landscape providing a wide range of advantages. However, recent figures have revealed that last year M&A activity in the UK dropped by nearly 20 per cent when compared with 2012, despite improving confidence in the markets.
Acquisitions have played a sizeable role throughout Talentia Software’s history, both from an internal and external growth perspective. Our acquisitions strategy has always been to add value, increase customer satisfaction and achieve higher market share. In addition to serving as a way to expand geographically, the acquisition process has provided us with expert insight into meeting those goals.
M&A: weighing up the benefits and risks
From an organisational and employee standpoint, there are significant benefits and risks attached with M&A activity; as such, a number of considerations need to be taken into account in order to effectively manage change. Key corporate benefits of M&A include the opportunity to bring new talents and skills and to review business direction, while from an employee perspective, there will likely be opportunities created to broaden the scope of individual activities and competencies.
The potential risks of joining two or more corporate cultures should be taken into account, of course, such as a lack of directional clarity. Too much overlap between merging organisations is also a significant risk, as is joining two firms that are too far removed in terms of both products or clients.
Generally speaking, change can be effectively managed through the creation of different business units, while making sure that overall corporate objectives are shared. Change management is crucial to the M&A process in order to allay internal fears through clear communication and to demonstrate the alignment of core competencies. Talentia’s stance, for example, has always been to appoint the most qualified Managing Director to meet strategic objectives for market penetration and not necessarily to retain the one coming from the acquiring company. Companies considering the M&A process should always make sure to focus on complementary acquisitions in key development areas.
The expanding role of the CFO
There are several financial considerations that must be taken into account for a successful acquisition or merger, placing greater importance on the role played by Chief Financial Officers (CFOs).
CFOs are integral from both a pre-acquisition and business strategy perspective and must carefully consider all financial elements to ensure the merger will bring more than 1+1. Increasingly, it is the CFO’s responsibility to make the most of complementary company structures and drive benefits such as increased projected revenue from each customer thanks to a cross-selling strategy; channel expansion to expand customer base and general geographic expansion to expand market reach.
An in-depth analysis of all financials of the targeted company by the CFO should also lead to an accurate understanding of its business model and processes, its strengths and weaknesses, and the areas where both companies can merge forces to help increase revenues and margins. At a time when many companies of all sizes join together to reach a critical size, CFOs should, without question, look to dedicate an increasingly important priority in pre-acquisition and business strategy analyses.
People power should not be underestimated
According to KPMG analysis, 70% of acquisitions fail in terms of creating shareholder value. I would suggest that a key factor behind this is due to the value of people often being overlooked; people are, without question, instrumental in the success or failure of a merger.
Far before the merger is publicly announced, firms should take the time to clearly explain to every associate the reasons behind the merger, emphasising the new company project and the position he/she was expected to hold in the future organisation – after all, this is what is truly important to every individual working towards company goals. Timing is also essential, as team integration has to be carried out rapidly as soon as the deal has been decided, agreed and announced.
Despite the aforementioned advantages that can be achieved as a result of M&A activity, companies must carefully evaluate the potential impact of aligning their goals with other organisations. Clear corporate benefits can be achieved by working closely with the CFO and finance department to ensure that this move is the correct strategic fit for both the organisation and its people.
About Julie Windsor, Managing Director of Talentia Software UK
A graduate of Cambridge University, Julie started her career in the software industry with a leading financial services company and later moved to a subsidiary of US giant, Control Data, where she was responsible for introducing solutions targeted at HR. Recognising that new developments in software were about to change the face of HR, Julie was part of a team that formed HRM Software, which focused on talent management solutions for major international businesses. As a director and board member of HRM Software, Julie worked with over 50% of the top 100 UK companies and helped to turn it into the market leader in its field. After the merger with Cezanne Software in 2006, Julie was appointed Director of Operations for the UK and Benelux and was a member of the board. Following the acquisition of Cezanne Software Holding Limited by Talentia Software (formerly known as Lefebvre) in 2013, Julie is Managing Director of Talentia Software UK and on the board of Talentia Software Holding Limited.