CFO Studio Magazine with Dominic Caruso, CFO, Johnson & Johnson

GUIDANCE ADVICE Sudden Scale Boosting the ROI from a roll-up E xpect more roll-ups as baby boomer entrepreneurs decide to sell. Roll-ups involve the acquisition of several businesses over a short period of time. A one-stop shop can be created if the acquired businesses are complementary. Geographic coverage can be accomplished if the acquired businesses are competitors. Either way, a roll-up is an ambitious, capital- driven path to growth. The corporate CFO is typically expected to lead due diligence, conduct valuations, and find cash. It is equally important for the CFO to remain engaged after the deal(s) are signed. Imagine what is involved when multiple businesses are acquired quickly. In addition to the strain on capital, integration involves people with divergent philosophies, companies with varying cost structures, and customers with different expectations. Former business owners/entrepreneurs won’t respond well to micro-management or nagging. Entrepreneurs choose to participate in a roll-up in large part because they crave strategic discussions, effective global marketing, competent financial management, and rewarding peer relationships. If you are the corporate CFO during a roll-up… Delegate Once deals are made, the priority is the generation of profit from the combination of the acquired businesses. Integrating disparate businesses takes time (therefore money), so most corporations make only minor adjustments during the first year. The corporate CEO uses the first year to evaluate the leadership of purchased companies. Frankly, the CEO can quickly feel like the foster parent of squabbling children who all crave more attention. The corporate CFO is asked to standardize and centralize accounting to look for possible cost efficiencies. In my experience, the first year is more productive when the CFO delegates documentation and analysis of past and current performance to the Controller. That way, the CEO, the CMO, and the CFO can all focus on creating the future. Together, they will consider important questions about what kind of customers will value a one-stop shop, which capabilities of the individual companies can be leveraged, and how pricing should be approached for bundled services. Stand Up In a publicly traded corporation, there will undoubtedly be pressure from shareholders and Boardmembers. It is less likely that the corporation will make questionable decisions when the CEO, CFO, and CMO confer and involve the entrepreneurial leaders of the acquired companies. For example, it could be tempting for one executive to conclude that everyone should back off of marketing and sales to focus on the top few customers to squeeze out as much short-termprofit/cash as possible for the corporation. With three future-focused corporate executives, the risks associated with taking a shortsighted approach like that would at least be discussed. Forcing the entrepreneurial leaders of acquired businesses to live with bad decisions erodes credibility, trust, communication, and profit. Earn Trust Leaders of acquired businesses are often susceptible to “seller’s remorse.”Their financial livelihood and professional reputations ride on their decisions to sell. Being part of a corporation with lousy marketing, inconsistent rules, and/or hidden agendas can lead a former president to just focus on his/her earn-out. They can become reluctant to accept more responsibility. And they can become paranoid that valuations impacting earn-outs will not be computed fairly. That reaction can be prevented if the CFO provides transparency, consistency, logic, and fairness. C Known as The Growth Strategist®, Aldonna Ambler founded, built, and grew a global suite of companies to help midsized B2B companies to achieve accelerated growth with sustained profitability®. A Certified Speaking Professional (CSP), Ambler has addressed over 2,000 audiences and hosted a syndicated online talk show about growth strategies for 9 years. As a growth financing intermediary, Ambler has raised over $1 Bil for midsized companies. The winner of over two dozen prestigious national and statewide “entrepreneur of the year” awards, Ambler was inducted into the New Jersey Business Hall of Fame in April 2015. She is available to speak about “profitable resilient growth” and/or serve on the board of a growth-oriented B2B corporation (NACD Board Leadership FELLOW). Q4 2016 WWW.CFOSTUDIO.COM 43 ALDONNA R. AMBLER CMC,CSP The Growth Strategist ®