Expert Advice on Mergers, Acquisitions and Integration
Doug Cruikshank is the founder and president of The Cruikshank Advisory Group LTD. Cruikshank has personally completed over 125 transactions throughout Western Canada. He founded and is past president of the Association for Corporate Growth–Vancouver.
“One of the deals I was involved with quite awhile ago was an accounting firm. A large, old firm was looking to get into the midmarket, and targeted a leading midmarket firm in the area. It looked like a great acquisition because the company could learn the midmarket and work off of it,” says Cruikshank.
“Conceptually, the deal made a lot of sense. Implementing—the guys who decided to do the deal were not the guys who took over the business. Immediately, they got rid of all small clients and increased rates by 60 percent. Within a year, over half the clients were gone and 80 per cent of the employees were gone. In hindsight, they wasted their money on that acquisition. They kept all the big deal policies and threw away the midmarket attributes.”
Cruikshank knows the flip side, too.
“I did a brewery deal. I sold a small microbrewery to a large, national brewing company. The buyer had done six to ten acquisitions. They knew ten per cent of the clients would leave as soon as the deal was announced. They built that into their model. They absorbed the operations into the existing facilities. In the case of beer, it was simple. The beers aren’t going to get mad at each other like a couple of accountants could. They walked through all aspects and determined easy placement. The brands still exist today.”
Cruikshank allows that product integration tends to be easier than service mergers.
Lorraine Rieger McGregor is the founder and CEO Spirit West Management Inc. McGregor has worked with more than 100 organizations on integration planning and preparation. She is the current president of the Association for Corporate Growth—Vancouver.
“One of the most difficult transitions in an acquisition is when one competitor has bought another. They have been foes for many years, and if the acquiring company comes in like the conquering hero they are basically going to kill off the goodwill, the opportunities and what makes that acquired company great,” says Rieger McGregor.
“That’s a very quick way to alienate people, to erode relationship, to stop the flow of creativity and not gain the opportunities originally wanted. Conglomerates don’t understand small business is relationship-driven. In the big company, it’s systematic-driven.”
Rieger McGregor co-developed the Smart Team toolbox to help change how people think, lead and manage.
“The Smart Team toolbox was built to help companies understand that change starts with the individual. If I’m going to make changes in my organisation, I need to change my thinking to change my behavior to change the organisation,” says Rieger McGregor.
“In the merger process, we like to bring the leaders together and help them understand what collaboration looks like. Collaboration is about, ‘what works for you; what are your interests? How can we find a mutually beneficial way to work together?’ The Smart Team toolbox is all about how to collaborate with yourself, other people and how you talk with each other.”
Rieger McGregor starts with a merger’s human elements to facilitate the operational infusion.
Stéphane Le Bouyonnec is the co-founder and president of Synergis Capital/Global M&A Canada in Montreal. Le Bouyonnec possesses a strong background in corporate strategic planning, mergers and acquisitions activities and financing initiatives.
“It is very important for a board of directors to know what the next steps are after acquisition. ‘Are the synergies going to be on the revenue side or are we going to reduce expenses?’ What has to happen has to happen fast,” says Le Bouyonnec.
Le Bouyonnec places a premium on rapidly introducing and executing a resolute plan. By doing so, uncertainty and wasteful steps can be avoided.
“If you enter a company and then figure out the plan, it means the work was not well done from the beginning. When doing due diligence, at that moment you know if there are any operational problems like the computer system obsolete or what needs to be changed. [Before the acquisition] is the best time to put together the plan. That’s how you extract more value out of the transaction after closing. You have to tackle all the items of the plan to intercept all underlying values.”
Regardless of the numbers, regardless of the industry, regardless of people—all are variables. A fixed variable in a successful merger and acquisition: comprehensive planning at the outset, committed leadership from start to finish and swift execution.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.