Successfully integrating two finance functions as part of a merger deal is a tremendous challenge for chief financial officers and other financial leaders.
Having a clear idea of possible post-merger pitfalls in the early stages of a deal can help set the course for smoother finance integration. Here are four common issues you could face and what to do to avoid them.
1. The time crunch
To maximize the efficiency of integration, you need to make sure you properly plan ahead by setting goals and objectives you want met on Day One, or within a short time frame thereafter. This includes clearly communicating those goals to all finance employees who will be affected by the integration.
Being proactive about outlining objectives can prevent a time crunch when you actually need to begin aligning financial processes. Employees also will know exactly what their role is in helping to enable a smooth integration. This can save hours otherwise spent in “fire drill” meetings and creating workarounds and quick fixes that waste valuable resources.
2. The IT meltdown
Information technology is central to the successful integration of two finance functions. But combining or implementing new financial systems and organizing other IT-related logistics that will support the post-merger finance team can take a great deal of time.
IT personnel therefore should be consulted during the planning stages of the integration. Otherwise, you may be scrambling at the last minute to consolidate information into a single enterprise resource planning (ERP) system, or may realize too late that you need a major software upgrade just so finance staff can perform routine functions.
3. The unmapped journey
Without benchmarks, management and their finance teams can easily lose sight of the bigger picture — that is, the broader business objectives to be achieved from the merger — once they become mired in the day-to-day aspects of the integration process.
Solid benchmarking allows finance leaders to analyze progress being made toward those larger goals, and to recognize specific areas where improvements can be made at the department level to help achieve financial optimization.
4. The knowledge gap
A merger can result in a more complex or different business model that requires updated processes and procedures — and may also create new regulatory compliance pressures.
Engaging experts with mergers and acquisitions expertise can help management determine the optimal way to combine finance functions in order to achieve the greatest efficiencies and reduce costs. Their insight can also help management ensure the newly merged organization is well prepared to meet both new and existing business demands, as well as all necessary compliance requirements.
The four pitfalls listed above are just a few examples of common challenges organizations encounter during finance function integration. The key to a smooth merger is to manage change proactively — from the moment the deal is set in motion and even beyond Day One. This can help to lessen any rough patches that the first few months following any major change can bring, even with the most thorough planning.
What challenges have you faced with finance function integration during a merger? Share your insights in the comments.