In a higher interest rate environment, buyers have increased their due diligence to ensure an appropriate valuation for an acquisition. These buyers also understand that value must be maximized in other ways to offset the increased cost of financing. Meticulous preparation and strategic leadership are now table stakes to maximizing value during a sale, and no one is better positioned to steer a smooth, rewarding exit than the CFO.
Here’s where and how CFOs can concentrate their efforts to successfully lead the business through a critical part of the transaction life cycle: the exit.
The 12-18 Month Advantage: Getting Ready to Sell
Ideally, companies should begin sell-side readiness projects 12 to 18 months before hitting the market. This timeframe allows for:
- Data cleaning and analytics: Ensure clean financials and robust data to answer buyer questions and support business trends. Financial presentations and other documentation must contain an appropriate level of detail on financial results, accounting policy, tax, audit, internal controls, technology, and more – a dedicated data management and analytics platform will be invaluable to compiling and properly conveying key information.
- Business adjustments: Optimize expenses, trends, and sales to present a clear picture of the company’s trajectory.
- A compelling narrative: Craft a data-driven story that showcases the company’s true run rate, growth potential, and value-add capabilities. Buyers seek strong fundamentals but also cultural and product-specific value that won’t appear on a P&L.
- Buyer hotspot identification: Understand where buyers typically focus their due diligence efforts so that exit-readiness initiatives conform to the mission of the sale and are indexed toward maximizing returns.
At this stage, it’s imperative that CFOs and management teams put themselves into the shoes of a buyer. What organizational characteristics and fundamentals are appealing? What makes for an attractive acquisition? What causes hesitation?
Answers to these questions can help shape the direction and priority of exit-readiness initiatives.
During this journey, CFOs can help conduct detailed assessments of all areas of the business pertaining to people, process, data, and technology through a go-to-market lens. This type of preparedness ensures the sale process achieves milestones and maintains momentum toward the exit. But they can’t do it alone. Additional strategic support is needed to accelerate time-to-value.
Bringing in Collaborators
One of the primary ways the CFO can lead from the front is by maximizing functional connectivity. Appointing process owners, project managers, change champions, and executive steering committees can help operationalize change initiatives over the next 12-18 months and marshal the expertise, capacity, and efforts of a larger group outside the OCFO.
This approach to transformation governance has the added benefit of pulling in novel ideas, strategic cross-functional insights, and tangible experience from those who are closest to the actual day-to-day operations of the business. These viewpoints and skillsets are essential to the change coalition. While the CFO serves as the quarterback and chief liaison with external entities like investors or buyers, the rest of the team is still making daily progress on the roadmap, often driven by a transformation management office (TMO). Often, Controllers, FP&A leads, and key members of the management team will be instrumental to the TMO.
Collaboration-oriented CFOs understand that augmenting their own skillsets with experienced professionals from the business and third-party providers is another lever for value creation.
De-Risking the Process
While CFOs build the roadmap toward an eventual sale, they’re also scanning the horizon for all risks that may arise before, during, or after the transaction. De-risking is a best practice regardless of exit intent, but it’s especially valuable in the eyes of buyers.
Here’s what that might look like during the exit-readiness process:
- Efficient management: Avoid lengthy delays by ensuring clear direction and focus. This is where the CFO can set the tone at the top and leverage the support of project management professionals, progress dashboards, and other functional leaders to remove obstacles and adhere to the timeline.
- Minimized disruption: Protect other business activities from the demands of the exit process. Exit readiness can quickly become a full-time job. It’s better to dedicate full resources to the effort rather than partial capacity pulled from many resources. There will be natural disruption to some functions more than others, but if they’re appropriately managed, operations should not suffer.
- Transaction experience: Leverage historical expertise and third parties to avoid inefficiencies and navigate challenges effectively. Depending on the type of exit, the number of parties involved can grow as the exit approaches. This includes tax, accounting, investor relations, audit, legal, HR, PR, and other resources that might need to be brought in. These stakeholders can help deliver on the exit objective in a way that maximizes efficiency and minimizes risks.
The Right CFO Makes the Difference
A well-prepared and thoughtfully executed exit process led by a skilled CFO can significantly impact outcomes for PE firms.
As a trusted advisor with comprehensive expertise developing OCFO playbooks in collaboration with PE sponsors, CrossCountry Consulting designs and implements transformative enhancements to propel PE sponsors toward greater success in an increasingly competitive landscape.
To ensure your organization has the right people in place to maximize value, navigate due diligence with confidence, and achieve a rewarding exit, contact CrossCountry Consulting.