I am currently on vacation with my family. Rather, I should say a trip with my family. I was told a while ago that you go on vacation until you have kids, and then with kids you go on a trip. Amid hauling two adults and a 4 and 2 year old to and from Southwest Florida on planes and rental cars, it occurred to me that being a parent and being on a trip means you’re doing one of two activities:
- You are busy carrying an object (beach chairs, towels, suitcases, backpacks, a child) OR
- You are busy discussing, making/buying, then cleaning up a meal every 2-3 hours
Now, I’ll be the first to admit we are having an awesome time on our trip. We are building lasting memories and the hauling/cooking activities are well worth it. But as I write this I am sitting down with kids asleep and looking out at the pool and reflecting on a conversation I recently had with a CFO of a company that is going through a sales process to a buyer. For the purposes of this email let’s call him Tim.
As noted in our RKCA Monthly Insights emails, we are exploring the M&A sales process. Tim right now is “on a trip” like my wife and I are. He is alone, carrying a lot of things, all for the greater good of his organization. It is my opinion that the parents on a trip are a lot like a CFO/Controller at a company that is about to be sold.
Take yourself out of my sandals of planning a trip, buying tickets, coordinating rental cars and all that and put yourself in Tim’s shoes right now. His company has been working over the last several months to interview investment bankers, select one and start to receive financial due diligence requests to build the Teaser and eventually Confidential Information Memorandum (CIM) that will be sent to potential buyers.
Tim right now is on his own answering the hundreds and sometimes thousands of requests for information. Yes, a lot of information also includes operational items and others (as we covered in last month’s article), but it is my opinion that in most processes, the CFO is the appointed main point-of-contact of the investment bank in terms of data gathering. Tim is also alone on an island, much like two parents alone on the peninsula of Florida. While Tim has some support staff in the Finance Department, they are not aware of the sales process of the company. As far as they can tell, it is business as usual, and Tim is required to complete his current workload of CFO responsibilities in addition to answering data request from the investment bankers.
It is my opinion that the CFO of a company going through a sale is one of the most critical members of the deal team. Yes, ownership and management are responsible for questions in management meetings and overall vision, and often the CFO is as well, but the CFO carries the heavy load of beach towels and chairs or rather data requests that can take up weekends and weeknights outside of the normal work hours.
If you’re a business owner considering a transition, it’s my opinion that you need to have a strong person in that finance role with a depth of knowledge that may pre-date when he or she was hired. That person needs, in my opinion, to be educated on the history of the company and all the good and bad in advance of a sales process. It is my opinion that as a business owner, you should also make sure that they are taken care of and supportive throughout the process. While this may not include a drink at the pool at the end of the day, it CAN include support like hiring additional staff during the sales process. Or, engaging your CPA firm to provide support is one option or hiring an outside firm for part time data clean up and financial reporting is another method to alleviate some of the workload of the CFO.
But perhaps most important, and this is my opinion, is selecting an investment banker who knows you and who can work well with your CFO. Hiring an experienced team that has been through transactions, who are operators and have sat in the chair of your CFO, can be incredibly helpful. The last thing your CFO needs, in my opinion, is data requests that are inaccurate or that add any more to his/her plate than needs to be added. So, if you are a business owner considering a transition, you may want to consider including your CFO in the interview process with bankers. The rapport and confidence that can be built between your banker and that person in my opinion is a critical piece of the sales process. My final piece of advice would be to remind your CFO that this “trip” will be over soon. That it will go faster than they thought, and that once it’s over, it will have all been worth it.
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