How CFOs can get better at post-deal integration

After the closing, the work on an acquisition is far from over; integration is where organizations prove the validity of the deal thesis.

Yet, just one in three acquirers “fully achieved” their deal objectives following an acquisition, according to a recent PwC survey of 530 C-suite executives and dealmakers.

Successful organizations do their integration homework early to establish a strategic “North Star,” according to experts who spoke with CFO Brew. They also bring in the CFO to track whether deal objectives are being met.

“The strongest acquirers, the most purposeful acquirers, don’t simply integrate the company they bought. They take the moment to architect the company that they intended to create,” Kevin Desai, PwC’s US and Mexico deals leader, told us.

Involving the CFO “brings rigor” to the operation, Desai added. “That rigor, it takes away the second-guessing, like who’s responsible for driving what, where is the value in the deal coming from?”

Where to focus. Companies should start thinking early on about how the two businesses will operate as one, Desai said. Successful acquirers “assign an owner, timeline, and funding to every value initiative before integration begins,” according to the PwC survey.

Finance is certainly busy during this process, but the CFO (or someone on their behalf) needs to be involved in broader governance conversations as well, he said, “to understand, what are the costs to achieve, what’s the timeline to achieve, how are we going to report on those synergies, and how are we going to measure ROI?”

Even if organizations do the early work, “there’s a great risk that all the other things surrounding the heart of the transaction take over. People start executing on things and doing things functionally, geographically. We start to work more together, and we run a risk that we…[drift] away from the most important item, which is why did we join forces to begin with?” Martti Nurminen, CFO of electronic invoicing platform Basware, told CFO Brew.

Basware closed its acquisition of vendor fraud-prevention company Trustpair in early October. Nurminen said it’s staying focused on customer value and go-to-market activities by “not spending time in internal reviews debating what process we use for what, what systems we use for what.”

Assessing and tracking. Basware and Trustpair are, “from a technology perspective, operating model perspective, extremely complementary,” Nurminen said.

In assessing whether the deal made sense, “the most important question in any acquisition, the fundamental industrial logic, I really go back to customers’ needs,” he said. Customers, Basware leaders saw, were contending with vendor fraud “every day more and more because AI makes fraudsters smarter and better.”

Following the deal close, Nurminen is monitoring certain KPIs to ensure the company is making progress on its objectives. While he didn’t divulge all the metrics he’s tracking, he said he’s closely following changes in annual recurring revenue (ARR) and customers’ product adoption.

Beyond the product fit for the two companies, Basware considered whether the people at both companies would gel, even though Trustpair is operating independently following the acquisition.

“You don’t always hear CFOs talk about [this], but I very strongly feel that real value realization post-closing transaction, a lot of it comes down to making sure that you also do your cultural homework, your ‘people’ homework,” Nurminen said. “And in this case, the connection with the Trustpair leaders and the whole team was very strong.”

Standing on business. Additional PwC research on M&A synergies showed there’s also value in communicating deal objectives and reporting on progress. PwC’s consulting arm analyzed 180 public M&A deals valued at $1 billion or more, and found the companies that announced and reported on synergies enjoyed greater increases in share price than companies that didn’t.

In addition, it’s important that synergies are measurable. According to the PwC deals survey, 62% of successful acquirers said they were “very confident their reported synergies are real and auditable,” versus 27% of “limited-success acquirers” who felt that way.

Specific metrics work better. There’s a “double-counting effect” if companies tie synergy goals to broad indicators like EBITDA or revenue growth, Desai said. In scenarios where one company buys another for its complementary products, it’s more valuable to track how frequently a salesperson is selling both products to customers.

“The KPI should be measuring how often is that actually happening,” Desai said. “How often is [a] customer who used to only buy one product now buying both products? And [acquirers] should set a target at that level.”