Why CFOs Are Becoming the New Masters of Mergers and Acquisitions

In the wake of the Great Recession, CFOs are increasingly becoming more integral to their firm’s merger and acquisition deals than ever before.

 Why? Put simply, they are looked to by other senior leaders in the firms involved as arbiters of value. Their job is to answer the question: Will this transaction add or subtract value to our company? And, by all accounts, post-recession transactions tend to carry less profit margin, and thus require even greater CFO scrutiny.

 “The best returns from M&A come from transactions during recessionary periods, the worst when the economy is very strong,” Andy Rose, a CFO of metals manufacturer Worthington Industries, told CFO Magazine last year.

 According to a new report by Deloitte, CFOs should consequently focus on two overarching goals: creating a “roadmap for value” from the deal, and offering “greater depth of detail” on the valuation delivered to senior leaders and board members.

 CFOs help their firms be more strategic buyers.

 “As CEOs and Boards look to renew growth in an anemic economic recovery, many CFOs are being called upon to facilitate successful Merger & Acquisition driven growth strategies,” Deloitte found. “With over a trillion dollars of cash on corporate balance sheets in the U.S., and improving capital markets, many companies are seizing the moment to become strategic buyers while others divest non-core assets.”

CFOs are vital to the valuation process.

The lines of an M&A transactions are more nuanced now. So, as Deloitte suggests, “As the line between pre- and post-transaction blurs, more is being demanded of the CFO and the finance organization in the valuation process.”

CFOs reign in vision-driven CEOs.

CFOs can make it easier for executive management and a board of directors to walk away from an expensive transaction by making sure the company is not banking its future on one deal, says Rose. “If I have a pipeline of 20 opportunities, I can walk away and go to the next deal on the list,” Rose says.

QUESTION: How do you guide your firm during a merger or acquisition?