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9 out of 10 transactions were deemed successful when the Integration/Separation of the Finance function was executed well. Thus, the Finance function seems to be an important player in preparing for and executing an Integration or Carve-out. How should the Finance Function be incorporated into a transaction and what makes a Finance function successful?
Although almost every company around the world faces unexpected challenges due to the current COVID-19 pandemic, we are confident that Mergers and Acquisitions (M&A) will remain important in both the short-term and long-term. Companies considering M&A activity need to be able and willing to pursue a transaction, which requires both adequate capital and the right deal strategy. In this current scenario, where the outcome is not known, value preservation is critical, and with that the need to prioritize finance and liquidity becomes even more important. In addition, independent of the crisis, experience shows that deals are extremely complex and challenging for any organization. Dealmakers have to focus on creating long-term value in order to realize synergies after acquiring a business or carving out parts of a business.
Our new study report looks at value creation in deals from the perspective of the Finance function and the influence of the Finance Integration /Separation on the overall Deal. Finance is an essential function within every company and is involved in almost all corporate activities. Especially during crises, the Finance function is a company’s anchor that ensures survival by monitoring the company’s situation, securing the cash position and constantly performing (liquidity) forecasts. Due to these crucial roles within a company, it seems to be plausible to assume that the Finance function is also quite important in the overall transaction and that the success of the specific Finance function’s Integration /Carve-out is instrumental to the overall M&A success.
The survey results confirm the underlying assumptions: 87% of respondents who were successful at integrating or separating their Finance function also experienced overall deal success. Furthermore, the success of the Finance Integration /Separation accelerates the overall transaction speed.
To better understand how the Finance function can contribute to value creation in deals, the study looks at which Finance activities are especially crucial for the success of the overall transaction. For that, three major factors were identified:
Besides the responsibilities in the overall deal, the Finance function has to focus on its own Integration or Carve-out. So, what are the key factors contributing to a successful Finance Integration/ Carve-out?
Based on these success factors and the other findings of the study, we have composed a list of seven recommendations to help to navigate your next Integration/Carve-out project. You can find this checklist in our study report, next to other interesting insights specific to the Private Equity sector.
Especially in times of an unexpected crisis with unpredictable development, it is vital to keep control over the business, be agile to rapid changes, and ensure value is both preserved and also grown when opportunities arise. Whether your transaction is already in-flight or planned for the future, the Finance function can be leveraged to drive the Integration/Carve-out further in order to create as much value as possible. The developed checklist provides you a high-level template of key topics to focus on for a successful and value enhancing transaction. However, every transaction is unique in terms of associated company culture, structure and scope, and therefore needs specific approaches and strategies tailored to that situation. We as PwC have experience across a number of transactions which provides a broad knowledge base of scenarios you may be facing on your next M&A opportunity and can work with you to identify the individual success factors for your specific project.
To receive all the interesting results and insights of this study, download the report “Value creation in deals – Finance Integration and Separation”, where you can review the services we offer, start discussions with our experts, and make your future transactions even more successful.
Partner, Deals Strategy & Operations Leader, PwC Switzerland
Tel: +41 58 792 14 23