Buy and Build Strategies: How CFOs and FDs maximise acquisition efficiencies by identifying cost and revenue synergies

The economic crisis is leaving its mark across multiple industries and casualties are revealed almost daily. From high street brands to smaller businesses under the radar of the press, businesses are being acquired either directly or with the assistance of Private Equity.

One of the most important pieces emerging is the ability of the acquirers to identify all the revenue and cost synergies during the subsequent integration. The acquiring company’s CFO or FD is best placed to ensure these efficiencies and opportunities are not missed.

McKinsey report “The one task the CFO should not delegate: Integrations” cites that at the global business level CFOs should not delegate the process of integrations to their team. For smaller organisations on steep growth paths the message is even more applicable as there is not the depth in finance teams that large businesses enjoy.

How can the Finance Director / CFO ensure opportunities are not missed when acquiring or merging?

There must be a keen understanding of the existing product and service mix and related gross margins. Analysing these against the acquisition business’ product and service mix and margins is crucial in identifying where the value lies.

Understanding the overhead costs of both merging business is crucial to planning the most effective allocation of combined resource.

In order to facilitate this CFOs and Finance Directors must have a strong grip – for both businesses – on the relative performance of products, services and a deep understanding of costs and resource allocation. Failing to appreciate the detail risks missing great opportunities.

Questions to be answered include:

“Do we know which of our products or services are our best performers?”

“Which features of our target companies products, services or markets will create opportunities for us post acquisition and how exactly will they impact the combined bottom line?”

‘The 5D FD’ White Paper  underpins the importance of ensuring the CFO is sufficiently hands-on to both analyse service and product margins and model the future post-merger environment.

Alternatively if you’re a founder come along to our Finance for Founders Event on Thursday 18th May 2023 to discover more about the best ways to prepare your business for sale. Contact us or email to register your interest

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