For many companies, though, achieving consonance between financial officers and board members who may have an incomplete understanding of the financial implications of M&A can be problematic. A recent survey by Deloitte identified the ways CFOs and boards end to diverge and provided some suggestions for gaining the buy-in and cooperation necessary to enable M&A deals to proceed smoothly:
* Ensure the CFO clearly and thoroughly communicates the potential future risks and benefits associated with an M&A, including risks and benefits associated with the diversification of products and markets, and then relates or “ranks” them against each other to demonstrate the level of risk that’s potentially involved. Seeing risks and benefits in relation to each other can help non-financial experts understand the tangible value of a proposed M&A deal.
* Understand that CFOs may be more “friendly” to the idea of accruing debt to complete M&As and other deals than many directors. When necessary, CFOs should be willing to describe the benefits of assuming debt rather than depleting cash resources when an M&A offers significant value to the company. Again, a comparative measure of return can help board members relate to the potential advantages of an M&A or other deal.
* Board members should be assessed for their willingness to embrace risk and to become better educated about risk-benefit analysis, and opportunities to improve understanding and facilitation of M&A deals should be evaluated and implemented.
By working together, directors and CFOs can create value and promote growth. If an M&A deal is in your company’s future, helping these two influencers to align more closely can help ensure you maximize your company’s ROI while minimizing its potential risks.
