According to Harvard Business Review, between 70% – 90% of acquisitions fail. So why do some M&A deals seem to sail smoothly while others hit rough waters? The secret often lies in how well everyone’s rowing in the same direction.
Interim leadership services play a key role in this. These professionals, like interim CFOs, CEOs, or CMOs, are like seasoned captains who know how to steer the ship through these transitions.
For M&A groups and investment bankers helping clients through transitions, understanding the value of interim leadership services can impact deal outcomes. Let’s explore how these professionals, particularly interim CFOs, can help align stakeholders and drive successful M&A transactions.
What is Interim Leadership?
Interim leadership refers to temporarily placing experienced executives into key roles. These executives address specific needs during times of transition, such as M&A.
Interim CFOs often take center stage in these scenarios. They bring financial expertise and lead efforts to gather and prepare important documents that can directly affect the company’s valuation.
Other roles, like interim CEOs or CMOs, might also step in depending on the challenge. These professionals are equipped to:
- Lead strategic decision-making and align key stakeholders.
- Develop realistic projections.
- Implement growth strategies or operational improvements.
- Communicate financial implications to stakeholders.
- Anticipating and preparing for the integration of businesses with differing cultures or systems
Regardless of the role, good interim leaders add value from day one. Let’s look at how these leaders help align stakeholders and keep M&A transactions on track.
Aligning Stakeholders for M&A Success
One of the biggest hurdles in M&A is aligning stakeholders who often have varying—and sometimes conflicting—priorities.
For instance:
- Shareholders want a quick return on investment and may pressure for a fast deal, even if it doesn’t fit long-term goals.
- Employees worry about job losses or changes in the company culture.
- Customers fear service disruptions or lower product quality.
- Regulators need assurance that the deal complies with all laws.
Interim leaders can help align these groups by promoting transparency and leading honest conversations. They act as neutral parties and:
- Provide objective assessments of the situation.
- Address concerns openly and professionally, such as managing resistance from employees and addressing customer loyalty concerns
- Offer clarity about how the transaction will benefit all parties involved.
This kind of direct, clear communication fosters trust, aligns stakeholder goals, and reduces anxiety during the transition.
How an Interim CFO Facilitates M&A Transactions
Once stakeholders are aligned, the role of the interim CFO expands to help move the transaction forward. They oversee key areas such as financial data management, shareholder communication, and reporting in M&A deals.
Interim CFOs are responsible for:
1. Performing Comprehensive Internal Financial Due Diligence
Analyzing financial statements, cash flow projections, and profitability metrics to uncover discrepancies, hidden liabilities, or financial inconsistencies at an early stage.
This process also includes reviewing all due diligence items that a potential buyer will require, such as the company’s operations, legal matters, and HR processes. A thorough gap list is then created to identify and prioritize areas requiring attention before proceeding further.
2. Identifying and Mitigating Potential Risks
The CFO reviews the gap list and systematically addresses each item, working to mitigate or eliminate potential risks effectively.
3. Developing Risk Mitigation Strategies
Creating robust risk management frameworks to address potential financial and operational disruptions. This helps safeguard investor confidence and protect the company’s assets.
4. Assuring Regulatory Compliance
Assuring that the company adheres to all relevant legal requirements, including antitrust laws, industry-specific regulations, and local, state, and federal standards. By proactively identifying and addressing compliance gaps, the company minimizes legal risks, protects its reputation, and guarantees a smooth transition during the sale process.
5. Enhancing Internal Controls
Evaluating and improving internal control frameworks to prevent fraud and errors during the integration of the companies.
In addition to these core responsibilities, they also bring tried-and-true communication strategies to the table, such as:
- Hosting regular updates to keep stakeholders informed.
- Creating customized messaging to address different groups’ priorities.
- Using stakeholder feedback in decisions.
By focusing on open communication and trust-building, interim CFOs help keep the M&A process on track.
Best Practices for Communicating with Stakeholders
Effective communication is a cornerstone of successful M&A. Tailoring your approach to each stakeholder group ensures their needs and concerns are addressed.
Interim leaders often follow these best practices when determining how to communicate with stakeholders during transitions:
1. Creating Tailored Communication Plans
Each stakeholder group—from shareholders to employees and customers—requires a different approach.
Here’s how you can tailor communication for each group:
- Board and shareholders: Provide detailed financial updates and strategic implications.
- Management team: Share operational impacts and integration planning.
- Employees: Communicate job-related changes and the company’s direction.
- Customers: Reassure them about service continuity and relationship management.
- Regulators: Keep them updated on compliance and reporting requirements.
2. Regular Updates and Feedback Loops
Frequent, consistent communication helps to reduce uncertainty and maintain alignment. Interim leaders often:
- Provide transparent financial reportingTransparency in financial reporting is key to building trust during M&A activities. For instance, an interim CFO makes sure that financial data is accurate, up-to-date, and easy to understand.This transparency gives investors, board members, and employees a clear picture of the company’s financial health. When stakeholders see the facts, their confidence in the process grows.
- Establish clear communication channelsThe interim leader acts as a main point of contact, informing everyone—from departments to external stakeholders. This helps avoid misunderstandings that could slow down or derail the process.
- Follow up on feedback to demonstrate responsivenessA good interim leader stays open to feedback from stakeholders and makes sure their concerns are heard. They also provide timely updates and responses, showing that they value input and actively manage the process.This two-way communication fosters trust and keeps the process moving forward smoothly.
These strategies not only minimize disruptions while reinforcing trust throughout the M&A process.
Case Study: How Interim Leadership Drives Successful M&A Outcomes
Let’s look at a real-world example where NYFG provided M&A assistance to an accounting services firm. Interim leadership played a leading role in aligning stakeholders, guaranteeing compliance, and facilitating a seamless transition.
1. Pre-sale Due Diligence & Legal Documentation
Interim CFO leadership was essential in preparing the firm for its sale. One of the primary tasks involved creating comprehensive service agreements and legal documents for customer and supplier relationships.
This preparation not only guaranteed regulatory compliance but also addressed buyer concerns during due diligence, reducing potential deal friction.
2. Collaborating with M&A Consultants
Acting as the bridge between the company and its M&A consultants, the interim CFO provided detailed financial data and clear communication. This fostered transparency and trust, two critical factors highlighted earlier for stakeholder alignment, and kept all parties focused on achieving shared objectives.
3. Negotiating the Sale to an ESOP
The interim CFO partnered with corporate attorneys and the M&A team to negotiate the transaction terms, ensuring the deal balanced the needs of shareholders, employees, and long-term operational goals.
The successful sale to an Employee Stock Ownership Plan (ESOP) demonstrated the importance of tailored stakeholder communication and a collaborative approach to addressing concerns.
The Outcome: A Win for All Stakeholders
Thanks to the interim leadership’s strategic oversight, the company transitioned smoothly under its new ESOP structure, providing continuity and financial upside for employees and securing the owner’s legacy. This case shows how interim leaders solve challenges like alignment, due diligence, and compliance to ensure successful M&A transaction.
If you’re seeking expert financial guidance or steady leadership to support your clients, NYFG is ready to help. Don’t leave the success of your M&A transaction to chance.
Reach out to us today for expert guidance that ensures financial clarity, stakeholder alignment, and a seamless transition.
