The demand for acquisitions appears unrelenting as organisations across the financial services sector look to boost revenues and market share. While, more often than not, senior management teams focus on the commercial rationale for these deals, it is the integration that actually determines if a deal is successful or not. The resulting culture from separate organisations coming together will make a fundamental contribution to ensuring the integration works – or doesn’t. The maxim ‘Culture trumps strategy every time’ is particularly applicable in M&A integrations.
It’s tempting to think of the finance department’s role in the integration after an M&A as limited to producing reams of figures and excel sheets showing the position of various parts of the business. Of course, the numbers are hugely important, no one would deny that, but by pigeonholing finance in this way, organisations could be missing out on a number of other ways the CFO and their team can assist in the integration after an M&A.
The challenge in managing culture is that, as opposed to growing market share or driving cost efficiencies (with hard numbers), the approach to establishing a strong integrated culture resulting from an M&A deal is much more difficult to plan for. To maximise the chances of success, integration planning should be started in the pre-deal stage. Leaving it until after the deal is done or day one of the new organisation arriving is too late.
While the CFO does not need to move into the space looked after by HR, they do need to think more widely than just the numbers. An acquisition will require the delivery of change and any change comes with an inherent risk. A CFO can put in place systems to avoid making mistakes, but this can lead to a loss of agility and the ability for the business to respond to change. What’s needed are systems which allow for a certain amount of change and risk, but once the risk reaches a particular level, there are checks and balances in place to bring this to the attention of the senior team so they can intervene if necessary.
When judging whether an M&A has delivered the required value, there will be many metrics in place, but they cannot only be financial. There could be targets around customer service scores after the integration, staff retention rates and other areas that may be slightly subjective, but by defining and measuring them, there is at least effort going into looking at wider outcomes and how successful the integration is proving.
In an M&A, benefits may only become apparent months, or even years, down the line. But if they’re not being measured, then the value, or lack thereof, will never be known. By being involved in pre-deal planning, putting clear measurements in place for financial targets and risk levels, as well as ‘softer’ metrics, the CFO and finance team can help the organisation judge the success (or failure) of the integration. For companies that make frequent acquisitions, being able to undertake them smoothly, learn from them and apply these learnings to the next acquisition to make it even more successful could be the difference between pulling ahead of competitors or falling behind.