Global

Finance
360
FINANCE AS A CATALYST
FOR A SUCCESSFUL
MERGER OR ACQUISITION
SIX FOCUS AREAS TO ADD VALUE
TO THE INTEGRATION PROGRAM
Your company has just announced a pending merger or acquisition, and the Finance
“The Finance
organization has a key role in the successful integration of the acquired asset. As part of
organization plays integration effort, the Finance organization must develop and execute a plan that effectively
integrates the new business while controlling cost and risk. The decisions Finance makes
a critical role in are critical to realizing the anticipated value creation and its ability to communicate that
value to stockholders, creditors and other relevant stakeholders.
the planning and
The challenge is bucking the historical trend of mergers and acquisitions. Studies have
execution of the shown that many mergers and acquisitions fail to deliver the anticipated increase in
shareholder value. In fact, some mergers and acquisitions have been known to actually
integration plan.
destroy shareholder value. It doesn’t have to be that way. Thoughtful planning and careful
The right execution of the integration program can increase shareholder value and create the
scalable platform necessary to support future growth.
leadership and
Leadership at all levels of the Finance organization is required to successfully drive the
approach to the integration effort. Executive sponsorship will be most effective when it is visible and
committed to providing the necessary resources for a successful integration. Leading
integration will companies also commit dedicated leaders to each focus area to ensure that proper
attention is given to the integration program while maintaining the leadership and staff
enable the
necessary to run the existing organization during the integration period.
company to
The table below highlights six focus areas that are essential to any merger or acquisition.
realize the value Proper planning and methodical execution are the keys to a successful integration.
anticipated during Table 1: Top Focus Areas for Finance Integration
the pre- Focus Area Description

acquisition Program Management Leading the merger program to deliver value through
analysis and effective management of the integration process.

provide a scalable Workforce Planning Organizing the combined entity’s human resources to carry
out the work of the Finance organization.
platform to
Business Planning Managing the budgets and forecasts of the combined entity.
support future
Information Management Organizing the data structures and information flow required
growth.” for regulatory, statutory and management reporting.

Liquidity Management Managing the combined entity’s cash position to ensure

proper funding of daily operations and planned initiatives.

Risk Management Managing the new organization’s internal control

environment to ensure the proper identification and
mitigation of financial risk.

Global Finance 360 | Copyright 2011 | All Rights Reserved 1

About Global Finance 360
Global Finance 360 covers the
world of corporate finance and
accounting and how these
activities are impacted by
globalization. Focus areas
include Finance Delivery
Strategy, Shared Services,
Business Process Outsourcing,
Process Improvement and
Organizational Design.
Global Finance 360 is run by
Steve Lynch. Mr. Lynch is a
Principal in the Finance
Transformation practice of a
global consulting company. He
is responsible for the marketing,
sales and delivery of Finance
Transformation services in North
America and serves as a key
liaison for his company’s global
Finance practice. He brings
more than 15 years of
experience advising global
companies on their service
delivery strategies and has
served over 60 clients in a
variety of industries including
consumer product and industrial
manufacturing, aerospace &
defense, transportation,
technology, entertainment and
financial services. He has also
served as a Controller in private
industry and as an auditor in
public accounting.
Mr. Lynch is an active content
contributor on the topics of
Finance Transformation and
globalization and has presented
at various forums including the
IQPC Shared Services &
Outsourcing conference. He can
be found on the web at
www.globalfinance360.com.
Contact Information:
Steve Lynch
Toll-free: +1.800.216.2512
Office: +1.719.481.2599
1042 W. Baptist Road
Suite 194
Colorado Springs, CO 80921
slynch@globalfinance360.com
www.globalfinance360.com
Program Management
Any successful integration effort will be led by a strong Program Management Office (PMO)
that provides the vision and guidance required. The PMO is responsible for developing and
executing the overall integration plan. This office should be led by a respected and proven
leader that has the organizational credibility to drive the program. Team leads for each focus
area should have not only relevant technical skills but also a proven track record of
leadership. The choice of individuals sends an important signal to the organization about its
commitment to a successful integration.
Workforce Planning
The integration team will need to design the new organizational model for Finance, align roles
and responsibilities, and assess the existing workforce skills in the buyer and target
companies. From there the team can document any gaps in skills and develop a plan to
remediate those gaps. Through all this, be sure to include existing outsourcing relationships
in both organizations as part of the overall capability assessment. A separation plan should
be developed for those employees who will not be part of the new organization. A knowledge
transfer initiative should be implemented to ensure that organizational knowledge is not lost.
An outplacement program should assist departing workers.
Business Planning
The integrated organization will need a unified and coherent planning process to ensure the
efficient use of capital. The operating and capital budgets of both organizations will need to
be evaluated to properly support the new organization. Personnel in the target company will
need to be educated on the existing forecasting process. Mid-flight projects will need to be
evaluated and existing purchase commitments of both companies examined. A key aspect of
business planning is the presentation of expected results to investors, creditors and other
stakeholders. The perception of success or failure will depend in part on how the integration
story is communicated. The Finance organization is critical to the development of the
narrative.
Information Management
The team leading the information management effort must focus on the integrated
information strategy that will effectively satisfy the needs of regulatory, statutory and
management reporting requirements. A transition plan is required to ensure the efficient
integration and fair presentation of financial information. A particular focus should be placed
on financial master data, such as cost and profit centers and the Chart of Accounts that will
need to be mapped from the target organization to the buyer’s master data.
Liquidity Management
A unified cash management strategy is required for the combined organization. Depending
on the two organization’s cash management strategy, it may be necessary to reconcile the
overall approach to liquidity management. In the event of an acquisition, the newly acquired
business units would likely adopt the existing corporate liquidity strategy. The integration
team should pay particular attention to the separation of cash between the old and new
organizations in the event of an acquisition. In this event, cash receipts and payments will
need to be sorted through to ensure that the buying and selling organization both receive the
cash generated or supply the cash used by their respective organizations.
Risk Management
Throughout the integration process, internal controls over both the buying organization and
the newly acquired assets must be maintained. Financial statements will be issued and
audited for the combined company, and management will need to make an assertion on the
effectiveness of the internal control structure. Additionally, the company’s external auditors
will evaluate the veracity of management’s assertions regarding the internal control structure.
Conclusion
The Finance organization has a central role in the effective integration during a merger or
acquisition. Focusing on these six areas will help ensure that Finance is well positioned for
the integration effort.
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