As Buyout Boom Continues, Firms Seek CFOs Focused on Value Creation
As merger mania keeps a firm grip on Wall Street, the role of the CFO continues to evolve. A recent study found that CFOs are noticeably more optimistic about corporate mergers and acquisitions. But according to The Finance Director newsletter, research shows that more than 50% of mergers fail to create value. Why? One reason cited is that firms are not fully prepared operationally for M&A activities and are ineffective in monitoring the full benefits of integration. Thus, as CFOs predict continued strength in buyout activity for the rest of the year, Mitch Feldman, President of executive recruiting firm, A.E. Feldman, advises that CFO candidates who can focus on strategic decision-making and value creation stand to gain from the existing buyout binge.
A whopping 87% of CFOs forecast a strong market for deals for the remainder of 2007, according to the most recent Duke University/CFO Business Outlook Survey. More than a third of CFOs surveyed say they plan to increase M&A activity, while 56 percent expect to continue at the same pace as last year. A mere 7 percent expect merger activity to slowdown. The participants point to consulting, health care and technology as the hottest sectors.
The current boom in M&A activity has provided CFOs the perfect opportunity to become strategists, playing key roles in designing and implementing a company’s business model, a far cry from decades ago when CFOs were simply chief accountants and technical experts focused narrowly on a firm’s financial statements. But whether it’s pre- or post-deal, CFOs need to ensure that assets are optimized and the cost base is streamlined. In fact, The Finance Director states that the finance function should be transformed into a more outward-looking, collaborative, dynamic environment, with the CFO as the champion of change.
Unfortunately, in today’s Sarbanes-Oxley world, many chief financial officers express what has been called compliance fatigue. Both existing and new compliance requirements continue to be high on the agenda of most CFOs who must anticipate and plan for impending compliance requirements. The added workload has encroached upon the time CFOs have to focus on the bigger picture.
Thus, the bar has been raised substantially for the CFO. In order to capitalize on the current wave of buyout activity, A.E. Feldman says that professionals seeking CFO opportunities must be able to transition from director of value preservation to partner in value creation. And with the added risks and demands come greater rewards. In today’s environment, investors demand growth and precise forecasts. Executives who can achieve these goals will become valued players.
