Successful M&A: Managing Transactions and Market Cycles

Oct 2, 2023 | Leadership, Strategy, Valuation

With Cisco’s $28 billion planned acquisition of Splunk, it’s clear the M&A landscape has re-awakened.  As the economy cycles through stages of slowdown and strength, financial executives must lead with both patience and persistence.

At this year’s MIT Sloan CFO Summit, our session on Successful M&A: Managing Transactions and Market Cycles examines the CFO’s important role not only in the mechanics of ensuring a successful deal, but also the decision-making that leads up to, and follows, a transaction. We’ll hear from CFOs, including acquirors and acquirees, experienced in leading through economic cycles and deal economics. They’ll share their insights into today’s dealmaking landscape including vision, valuation and integration.

“We continue to see a pick-up in activity as buyers and sellers come to terms with today’s new valuations,” said Andrew Bonnes, Partner, WilmerHale. “As such, this is the optimal time to examine the ways in which mergers and acquisitions can be transformative in driving value for a business.”

Vision  Good deals begin with a cohesive vision around strategic objectives. Whether the goal is a product enhancement, geographic expansion, adjacent market entry, talent management or other objective, acquirors have a range of acquisition goals. “Begin with the end in mind” is a very good reminder indeed.  Also worth noting, even the best vision can be overwhelmed if implemented in an undisciplined manner such that a shiny object detracts from sound fundamentals.

Valuation  One of the key responsibilities of a CFO is to assess the financial viability and strategic fit of a potential target or partner. This involves conducting due diligence, valuing the deal, negotiating the terms and securing the financing.

A sharp pencil is always critical, and the rise in interest rates and therefore borrowing costs has arguably helped tame some of the excesses of 2021’s frothy M&A market. A keen eye on the competitive landscape can also make a difference between a great, good or sub-optimal deal.  Will other bidders emerge? How high is too high?

Integration   Melding two companies involves everything from aligning the financial systems to integrating processes and cultures. While technology can enable real-time data sharing, underlying policies and processes may require more nuanced examination. Post-pandemic questions of hybrid work and varying Return To Office mandates may also require more careful consideration.

M&A is not only about numbers, but also about people and culture.  Is the deal meant to add people as meaningful contributors? Who will join the leadership team and in what capacity? How does the acquiree’s bench compare to that of the acquiror’s? Expansive and meant to move the needle, or perhaps additions to an existing bench.

With deal-making activity on the rebound, CFOs now have the opportunity to move forward with value-creating mergers and acquisitions.