'If a deal isn't right, you must be brave enough to walk away'
Omnia's Wayne Koonin (pictured) shares his tips on maximising M&A opportunities.
“The only thing you can rely on as a CFO is the sale agreement. As CFO you need to read the agreement 10 to 15 times, word for word, to make sure that it stacks up,” says award-winning Omnia CFO Wayne Koonin, who says dealmaking finance leaders should focus on legal expertise, due diligence and the quality of their deal teams as part of the overall mergers and acquisitions (M&A) process.
After all, CFO’s play a critical role during an M&A process, often making sure that both the acquirer and seller maximise value and synergies in a transaction.
After involvement in M&A deals early in his career, Wayne has become known as a turnaround and IT specialist. However, at Omnia he has put his dealmaker cap back on and the company recently acquired Umongo Petroleum and Oro Agri in two separate deals for a total of R2 billion.
He shared some of his insights on dealmaking with fellow CFOs during CFO Day – and on CFO Magazine.
“The key lesson is that when the deal isn’t right you might need to be brave enough to walk away, despite the work you have put into the deal,” says Wayne.
“Equally, making the effort to figure out the deal and realise value can be very rewarding. Dealmaking tends to get into your ego and emotions, so keeping these in check is essential. An independent board or committee is the key to this challenge as they keep you honest and ask the tough questions.”
Ducks in a row Legal and tax expertise come at a premium and it’s one thing you cannot afford to overlook, even if your main focus is finance, says Wayne.
“As an example, if you’re doing a deal with an American entity and have done work previously in a country with political or economic exposure that may be problematic under American legislation, you simply cannot ignore this. At the same time, when tax advisors go beserk, you need to balance whatever they are worried about with the worst-case scenario risk that could materialise.”
Due diligence is probably the most “underestimated skills set”, says Wayne.
“Working with your partners to validate your perspectives is essential. Once the deal is done, you’re going to have to execute and implement and this can be much more effective if, during your due diligence process, you’ve given thought to the ‘end game’. You can’t get everything right, but you have to make sure that the due diligence is not just used for the valuation, but also to prepare future integration and getting a good understanding of the business. You need to set the bar high at the due diligence phase because you will pay the price later on if you do not.”
Wayne says that the quality of the internal and external team is essential for successful M&A.
“If you can build the internal team bench strength that will be very helpful as it can bring a diversity of thought and perspective while making sure at the same time you have depth and a range of skilled advisors to back up the team.”
This article was first published on CFO Magazine. The magazine can be read here.