Growing businesses often reach a point where they need professional financial advice, however, due to either their small scale or their recent incorporation, they’re unable to afford a full-time Chief Financial Officer (CFO) or controller. It generally helps them in cost-effectiveness but on the other hand, it acts as a big hit on their need to have a financial expert to manage their finances and guide them. This issue became a big concern over the years for comparatively small organizations that want to hire a good CFO.
To manage the challenges of growing organization it is important for the business to avail the services of experienced & matured finance professionals. To fill this gap and ensure that they gain good CFO services, one can appoint a Virtual Chief Financial Officer (vCFO) in India.
What is Virtual CFO?
A Virtual CFO is an outsourced service provider offering high skill assistance in the financial requirements of an organization, just like a Chief Financial Officer (CFO) does for large organizations. A vCFO may be a single person or entity.
Note: virtualcfo is a registered trademark of Virtualcfo, Inc. and vcfo Holdings, Inc. in the United States and other countries. However, as a generic term “Virtual CFO” is used by many finance outsourcing firms throughout the world.
How Virtual CFO Helps In Mergers In India?
A merger is a voluntary fusion of two companies on broadly equal terms into one new legal entity. A vCFO can help an organization in merger through the negotiation process, creating a merger that benefits both parties. Virtual CFO responsibilities in a merger typically include:
- Producing pre-merger analysis and due diligence: A vCFO in India has the greatest advantage in ensuring that bad deals never happen in the first place. They bring acceptance to the assumptions and analysis behind every transaction and ensure that the future business performance commitments are very much consistent with the assumptions originally used to justify the particular deal.
- Executing the transaction: A vCFO oversees particularly deal-related accounting, the structuring and the execution of a merger-related agreement, cash and financing requirements, and every other detail necessary for the operation of the merged company from day one.
- Creating a strong, stable control environment: A vCFO drives the integration of accounting policies, to prevent a nightmare on the first reporting period following the merger. This particularly involves implementing adequate control not only on the combined company but on both organizations during the time period before the merger is finalized.
- Integrating the two organizations: A vCFO must be certain that the right management information system is developed to let top executives run the combined company effectively and that those systems are in place from day one after the merger is completed.
- Designing the post-merger management architecture: A vCFO must plan an essential management process for the post-merger use. Many mergers in past were stifled when two management teams sitting across the table from each other after the close deal on a merger, cannot understand how their reports, programs, commitments, and processes might fit together.
- Providing financial decision-making support: During integration, most high-stakes choices are made that directly affect the organization for the years to come. A vCFO needs to head integration teams with an objective resource to make a fact-based management decision as one moves through the processes. This particularly includes planning and quantifying synergies so they can be incorporated in future budgets and, later, in concrete commitments.
How Virtual CFO helps in Laying Down Merger Strategy?
Virtual CFOs in India is in a unique position to contribute significantly during the Merger transaction process and, ultimately, influence the success of the particular deal. From the identification of a target through due diligence to post-close execution, vCFO typically is the team leader that monitor shareholder value before, during and after a deal.
The vCFO can successfully steer the organization away from any kind of deal killers and meet the expectations of the deal. As a risk manager, the vCFO must lead the strategic execution of the transaction in order to realize improved shareholder value or more importantly identify the Shareholder Value at Risk (SVAR). Although it is pretty much impossible to avoid all types of risk in a merger transaction, it is completely possible to manage/mitigate risk. A vCFO can additionally assess the risks related to intellectual capital available internally to successfully manage the integration.
A Virtual CFO is often expected to think and act like an operating partner and not just like any other finance guy.
How vCFO helps with the valuation of assets and liabilities?
A vCFO can help with accounting for the valuation of assets and liabilities as part of a merger. Such a person has experience in mergers and knows what the merger agreement should look like and what needs to be done from an accounting perspective. A vCFO can make sure everything is clearly spelled out, documented and properly archived so there are no outstanding issues left to be dealt with.
A virtual CFO can understand the more complex issues involved in the merger and thus can help ensure that its organization negotiates the most favourable deal possible. Engaging the services of a vCFO for help in the valuation of assets and liabilities can result in a number of positive outcomes. For example:
- Management can focus on running the newly merged business and integrating it into existing operations and not rehashing the same.
- Ownership and shareholder disputes are minimized or eliminated, thus eliminating distractions for both the management and employees.
- Unnecessary legal and other professional expenses down the road may be reduced or eliminated with a proper merger agreement, backed up by the proper accounting, in place from the beginning.
- Equity fundraising or even a potential future sale of a particular company are not restricted due to legal actions.
How VCFO Helps With Execution, Reconstruction, And Integration?
Post-merger integration remains a challenge in mergers and acquisitions (M&A) in India. The history of M&As in India is full of stories of acquisitions faltering due to integration issues and under delivering on expected benefits. The complexity of post-merger integration programs, especially in the case of large cross-border deals, calls for granular and an experienced virtual CFO in India in transforming and running complex business operations at scale.
Post-merger integrations fail to include:
- Inadequate support teams
- An inability to identify new synergies
- Poor program management, communications, and leadership
- Low decision-making.
Organizational success following a merger depends upon the effective integration of systems, operations, and compliance processes. Businesses require comprehensive integration capabilities, including process redesign and transformation skills, in addition to granular insights to achieve the desired outcomes. A virtual Chief Finance Officer with extensive experience can help the organization focus on execution support during all stages of the integration journey, including the critical areas of systems integration and data conversion, operations integration, finance integration, and compliance and risk management.
A VCFO in India can do a lot and no other person in the organization has a power that so effectively enables him/her to play the role of the merger manager. A virtual CFO must be able to lead the organization not only in selecting the particular merger partner but in ensuring that the expected value of the transaction is properly realized.
A merger can be a hair-raising experience for those without a virtual CFO in place — pushing their finance organizations beyond the breaking point. LetsComply provides vCFO services in India for a smooth Merger by your business. To know more, call us at +91-9717070500 or send an email at email@example.com.