M&A activity is an exciting milestone for a startup or small business to reach. Having interested parties court you for a potential sale is a dream scenario for many founders. However, not all small and medium business CFOs are prepared to successfully manage an exit.
Ascent CFO Solutions has put together a list of questions to help evaluate if your current CFO is up to the job or if you need to bring in someone with additional experience.
Does your CFO have previous M&A Experience?
This question sounds basic, but it’s critical. No amount of aptitude, good attitude or willingness to learn (all great qualities in more junior staff) is a substitute for M&A transaction experience. Ensuring your CFO has experience in IPO’s, private equity transactions, or major fundraising rounds is advisable. If your CFO does have relevant experience, dig into that experience to learn more about their role in the deal, what they learned and what they’d do differently if given the opportunity. This will give you insight into whether or not they are the right fit for the task.
Has your CFO kept up with clean and accurate financial reporting?
Sometimes companies move at rapid speed and key housekeeping tasks such as timely financial reporting and well-documented processes can unintentionally be deprioritized. Although this is a reality for many businesses, it’s never a best practice. Infrequent and disorganized financial and KPI reporting is a red flag that your current CFO isn’t ready to take you through an acquisition process. Due diligence on the part of the acquiror will likely be a thorough and intense process. Having a CFO that keeps clean financials as a standard operating procedure for your business will go far in lowering the stress and length of the due diligence process.
What perception and level of confidence do your Board and investors have of your current CFO?
Stakeholder management is one of the most important skills a CFO can lend a company during M&A activity. You should critically evaluate if your current CFO has done a good job of this by evaluating their ability to manage existing, high-level stakeholders such as investors and your Board of Directors. This should give you an important data point when deciding how to proceed.
Has your current CFO proven they can handle complex tax and legal issues?
During an exit, financial issues are often inextricably tied to complex tax and legal issues. The CFO who guides you through your M&A activity should be well-versed in assessing tax implications of various exit scenarios and work well with the company’s legal counsel to manage risk. A CFO’s ability to anticipate and mitigate risk in partnership with legal can mean preparing for M&A issues such as structuring earn-outs, shoring up financial liabilities and preparing for possible layoffs.
There’s a lot to consider when deciding if your current CFO is prepared to help sell your company. There’s no “perfect” CFO that checks all of the boxes. That’s where Ascent CFO Solutions comes in; we can help fill any gaps in experience with your current CFO and finance and accounting teams as much or as little as your needs require. Contact us for a free consultation with one of our experts.