Office of the CFO Blog

Welcome to a Guest Blogger on Office of the CFO: Paul Burmeister. Paul is a partner in Tatum's New England practice, a seasoned CFO/COO with M&A experience in technology, manufacturing, and business process outsourcing firms.

I'll be blogging on mergers and acquisitions, focusing primarily on the task of integration. I've been involved in M&A for more than 25 years, and I've had primary responsibility for integrating acquisitions as small as pre-revenue "tuck-under" start-ups and as large as billion-dollar publicly traded companies. No two integrations are ever exactly the same, of course, but one thing is certain: buyers and sellers both had best beware of surprises.

• You never know exactly what you're buying: Due diligence is critical for the buyer, of course, and the intent of due diligence is to make sure you know as much as possible about your target. But there will be surprises, and you'd better be ready to react. I learned this the hard way on my first two acquisitions. At the closing of the first one, the CFO refused to sign a key certification unless he was given more compensation from the founder and primary shareholder. He was terminated on the spot, by mutual agreement of buyer and seller. A few weeks later, we closed a second acquisition. The co-founder/CEO was particularly lovey-dovey with his wife at the closing dinner. The next morning, he had her served with divorce papers and disappeared with his girlfriend on a sailboat. In each case, we lost a key leader and all the historical knowledge and context he carried in his head. Fortunately, not all post-acquisition surprises are that dramatic, but there will be surprises. In your integration planning, you need to identify the most critical assumptions you've made - and develop contingency plans in case your assumptions are wrong.
  
  
• You never know exactly who's buying you: Sellers need to do due diligence, as well. What's your expectation of what life will be like after you sell your company? How well does that vision match up to what the buyer is telling you? If all you want as a seller is a wire transfer and a calendar full of tee times, maybe you don't have to worry...but if you expect to have a role post-closing, you should insist that you and your management team play an active role in integration. One seller I knew found the pre-closing diligence and integration planning so unsettling that he walked away from a sale that had been in the works for three years.

Surprises are the common denominator - they're the norm, not the exception. Whether you're the buyer or the seller, identify your most critical assumptions, think about what could go wrong, and build contingency plans.