The Essential CFO: A Corporate Finance Playbook

Chapter Nine

Executing a Merger or Acquisition

WHEN A COMPANY IS READY TO pursue a potential merger or acquisition, the CFO usually partners with the business sponsor and general counsel in leading a deal team that conducts due diligence, prepares a business plan, establishes the pricing parameters, negotiates the contract terms, and integrates the acquired company.

In addition, the CFO actively coordinates all of the various parties involved in a transaction, both the internal management and the external advisors, who can include investment bankers, lawyers, accountants, tax specialists, consultants, and other participants at various stages of the transaction. This coordination can contribute to a smooth and error-free execution, and can increase the likelihood that the transaction will fulfill the company's business and financial objectives.

DUE DILIGENCE

After entering into discussions concerning a transaction—either through one-on-one negotiations or as part of a competitive auction—the deal team will conduct a thorough due diligence review of the acquisition candidate. To the extent possible, this will include a relatively constant group of staff people who work on all of the acquirer's transactions and who can apply consistent procedures in ensuring that all the bases are covered.

Negotiated Transactions

Due diligence is best accomplished through a methodical, painstaking approach that involves substantial requests for information to be provided by the target. This is one ...