The value of the deal: Controllership’s role in M&A

October 16, 2024

A blog post by Keturah Henry, Christine Murphy, Heath Poindexter, and Katie Glynn

As the business landscape evolves, many companies preparing for or going through mergers and acquisitions (M&A) often focus on driving greater value while continuing to hit synergy targets faster and more efficiently. The controllership function plays a critical role in helping the organization maintain compliance with external reporting requirements for executing an M&A. However, controllers also have the opportunity to be strong business advisers who drive synergies and help enable M&A value realization.

Through its varied roles in the preparation, operation, and integration process, along with time spent on both compliance and value-driven activities, controllership can protect and enhance deal outcomes and influence how it defines its role in the M&A life cycle. With an understanding of these different roles and how they contribute to an M&A, controllers can utilize a framework to help prepare for a successful M&A with considerations to fuel more value drivers in M&A or separations across organizations.

How the various roles of the controller create value for mergers and acquisitions

To understand how controllers can prepare for M&A and increase the value capture for organizations, it is helpful to know how controllership’s various roles in the process contribute value to the M&A life cycle. Some of these roles may include:

• Executing the business-as-usual steward, operator, catalyst, and strategist roles and executing accounting, tax, and reporting, such as satisfying external information requests and requirements related to the transaction.
• Operational integration, such as managing people, process, and technology changes and transitions—as well as integration project management and cross-functional coordination—by liaising across the organization on qualitative and quantitative information.
• Contributing to program outcomes and deliverables and driving value capture through synergy identification and achievements.

How can these roles contribute value to the process? From operational value to insights, controllers play a critical role before, during, and after an M&A journey. It may occur through M&A strategy, due diligence, and transaction readiness by evaluating the organization’s financial health, assessing financial risks and opportunities, and other preparations. It can also occur from synergy and value quantification, iteration, and management by providing estimates and forecasts to drive informed decision-making, monitor performance against forecasts, and track targets to keep the organization on track to achieve its post-deal objectives. Finally, a controller’s operational role offers integration planning, close preparation, and program execution by confirming financial statements are in order; new financial systems are set up as needed, ensuring the financial elements of the deal are the drivers of the program; and financial operations continue to run smoothly.

Making the whole greater than the sum of its parts

While the framework can serve as an accountability checklist for controllers to help prepare for an M&A and set up the journey for success, there are some considerations to fuel more value capture in mergers and optimize the value extraction in separations. They include:

Identifying and considering all opportunities. Any available sources of value must be considered across cost, revenue, and capital synergies.

Setting and quantifying targets. This includes both run-rate synergies and one-time integration costs.

Preserving the rational. Making the initial logic for the deal a reality requires continuously threading it through the process from the initial target assessments to three to five years post-closing of the deal.

Making the parts greater than the sum to optimize separation

Aggressively focus on cost management. It is necessary to both maximize the value of the separation and any RemainCo restructuring. It is crucial here to address cost management priorities from the start. This includes identifying any one-time separation costs upfront, determining TSA needs early on, establishing stranded cost targets, and developing a detailed end-state RemainCo cost model with clear accountabilities. Too often, material stranded costs are not discovered until after the transaction, as sellers do not have a clear cost baseline or a defined target-state cost structure. Furthermore, one-time separation costs need a simple and effective mechanism to track and manage. Hyperfocusing on these cost management priorities in the separation can help optimize the benefits.

Controllership plays a critical part in M&A deals across multiple roles and contributing factors, and utilizing a framework to guide controllers through the deal, along with considerations to fuel more value capture, can enable a redefined role for the controllership function in a successful M&A. To explore further considerations for controllership’s critical role in M&A and value drivers that controllership can influence to redefine its role in the M&A life cycle, listen to our Dbriefs webcast on demand: The value of the deal: Controllership’s critical role in M&A: Dbriefs webcast | Deloitte US