These CFOs put the ‘strategy’ in strategic acquisitions

Organizations look to acquisitions as an effective way to make a strategic pivot—and we don’t need to tell CFOs this, but there’s no shortage of reasons to embark on a strategic transformation right now.

The increasingly strategic remit of the CFO includes devising and executing the strategy side of such acquisitions, according to finance executives who spoke with CFO Brew.

“Traditionally, the CFO in any firm is looked at as the numbers [person],” meaning they’d be brought in on a deal to make sure the math works, David Carlino, CFO of architecture and design firm CannonDesign, told CFO Brew.

Carlino, the self-described “oddball in the room” among architects and engineers, said he tries to push the firm to think differently about its acquisition strategy. CannonDesign has acquired eight companies over the last two years and change. Four of the acquired companies were design firms, and the other four consultancies.

CannonDesign started acquiring consulting firms in 2019 as a way to expand its client services beyond solely building design. The firm wants to extend the length of a client relationship from three years to something closer to three decades, according to Carlino.

“I can get involved with the acquisitions that deal with stuff that the architect isn’t looking for, that’s around what we do, that helps us kind of grow and be more attractive to clients,” he said.

In the current market, CannonDesign gets approached “a lot on opportunities to buy transitional ownership; you know, next generation not ready to take over transition planning,” Carlino said. “We walk away from most of that, to be honest, because they’re not strategic to us. We have a very disciplined strategic plan on what is it that makes us different in the future.”

Structure strategy. Sometimes a deal makes strategic sense, but the acquisition target isn’t a one-for-one fit. That’s the challenge Macrina Kgil, CFO of blockchain-native financial services firm Figure, had to tackle with the pending acquisition of nonbank residential real estate lender Kiavi.

Kgil said the deal is a uniquely structured tri-party agreement that also involves the global asset investment firm Sixth Street. According to a news release, publicly held Figure will acquire Kiavi’s technology and operating platform, while a joint venture between Figure and Sixth Street will acquire the company’s balance-sheet assets, including the loans.

Structuring the $717 million deal in this way ensured each party got what it wanted. For Figure, that meant staying true to its capital-light operating model, Kgil said.

“We wanted to buy the technology and the process, and also the customers and the employees of the company,” she explained. “However, the asset side of the house—and we’re a capital market infrastructure company—we wanted to make sure we had another party” brought into the deal interested in taking that part of Kiavi’s business.

Kgil conducted due diligence to ensure “the numbers made sense…and that we would integrate really well…That was a joint effort, but I do have to say it was hard. It was not easy thinking of a unique structure to come up with a way to acquire.”

The transformation imperative. The world feels a bit unpredictable right now. Companies are adjusting to the chaos—and those pivots may call for a strategic acquisition or two.

M&A is often part of company transformations, according to Suzanne Kumar, EVP of Bain’s global M&A and divestitures practice. Bain noted in its midyear M&A report that the recent rebound in dealmaking (global M&A value was up 41% in the first five months) is “grounded in strategic transformations required in a rapidly changing world.”

“The CFO needs to have a multiyear view on capital allocation, and there’s a lot of competing demands for capital right now,” Kumar told us. “The transformation around AI can be expensive. M&A can be a tremendous creator for value, but some companies have a more mixed track record. And so a CFO needs to be evaluating all of these kinds of investments with a hard look at the ROI, and making sure the investment is going to really move the needle for the business.”