Bridging the gap: M&A
Are CFOs and boards aligned?
Effective merger and acquisition (M&A) decisions depend upon strong collaboration and communication between the board and CFO – especially if both parties are focused on creating value by taking strategic risks.
But are CFOs and board members aligned as it relates to risk management and value creation in M&A activities? Deloitte, in association with Corporate Board Member magazine, surveyed corporate directors and CFOs from public companies with revenue of $500 million and above, to compare, contrast, and analyze their views on M&A and risk.
Overall, the survey results indicate that:
- A majority of directors and CFOs agree that their companies’ M&A strategy is to seek smaller, more strategic deals.
- Regarding primary purposes of M&A, CFOs were far more inclined than directors to cite differentiating or diversifying products or services. Directors were more inclined than CFOs to cite the pursuit of cost synergies or scale efficiencies as a primary M&A objective.
- Both directors and CFOs expect to deploy cash as the primary means of funding M&A transactions. However, CFOs are more inclined than directors to view debt as the primary source of funding.
- Directors and CFOs agree that the greatest cause for concern in achieving M&A success is integration failure. As to the greatest cause for concern during integration, both most often cited achieving cultural fit.
- Directors were more inclined to rate the finance team’s risk-related M&A abilities as “extremely effective” than CFOs. CFOs were less inclined to rate the board as “extremely effective” in this area.