All over the world, financial transactions are seen upwards. In the year In 2021, global mergers and acquisitions (M&A) activity has increased significantly, reaching $5 trillion for the first time in history, an increase of 64% compared to the previous year.
I have worked at startups, private equity firms, and high-growth companies, handling acquisitions such as acquisitions and targeting. In all cases, each transaction had unique requirements and needs based on the unique circumstances associated with each agreement. But underlying these differences were a few crucial similarities when it came to acquired-side financing.
If acquisition is a goal for your company, consider the following key factors to establish the best financial practices to support a potential transaction.
Hire the right people
Regardless of the way you want to earn, it is important to consider the outcome of the transaction – not all money is created equal.
As with most aspects of company building, success depends largely on the quality of the team. Business financial activities are no different. Defining clear roles for financial management and hiring experienced staff can often make the difference between 10x the cost and 20x the cost when negotiating deal terms.
The level and title of the financial management role will naturally vary depending on the level and end goal of the business. Early stage startups, for example, may not need a CFO. Instead, a strong COO and an experienced supervisor tend to provide enough structure and control at that early stage.
Initially, the decision to leave the CFO may be a function of budget and/or company ambitions. For companies that want to keep a small team, say less than 250 people, the CFO can unwittingly create a highly difficult leadership culture, in addition to expensive hiring. However, if a company is looking to scale and thinking about its growth path, the position of CFO is an important role.