In the latest article for our ‘Lessons from Leaders’ series, Richard Francis, CFO at Netcentric, shares his expertise on how to sell a business, from initial growth through to post-sale integration.
Back in 2010, Richard managed the transaction when Adobe bought Day Software and in 2017, he played a key role when Netcentric accepted an offer from Cognizant.
Going for growth
Rapid growth might be a common business goal, but each company will require a unique approach to achieve it successfully.
Service businesses like my current organisation, Netcentric, must anticipate hiring needs early as it can take around six months to train a consultant and more like nine before revenue comes in. You need to make sure the company is properly financed well in advance so you’re able to take the plunge swiftly.
Quick expansion also relies on a delicate balance of process versus action. You want processes to work efficiently so teams can spend their time doing what they do best, not wading through bureaucracy. The company was not created for the finance team, it was created to help customers and make sales. Remember that your role is to support the company in doing that.
Being prepared to act quickly is absolutely vital if you want to grow a business. Don’t get too bogged down spending months on business plans in spreadsheets that will soon be out of date. Instead, do something more quickly at a higher level that you can change as you need to.
A CFO needs nerves of steel to support a company through ambitious growth. When I took on this role, the CEO explained that my predecessor didn’t sleep for a year! It’s your job to reassure people but also to ensure the senior leaders understand the risks. There’s no room for politics and blame, people need to be allowed to make mistakes if you want to grow.
Preparing for sale
This is the time to focus on doing what you do and doing it well. Don’t waste time thinking about who might buy.
It’s critical that you protect intellectual property. You might find yourself under pressure to transfer intellectual property ownership, but resist this at all costs and be very careful with the contracts you sign. Don’t take legal shortcuts. If you have to give liability, make sure you have an endpoint.
Wherever possible, it’s better to be bought up than putting the company up for sale, and that means a different approach.
How to sell a business successfully
To lead a business through a successful sale, you don’t need to have everyone working on it. It’s important to keep ‘business as usual’, so you want as few people as possible caught up in the sale.
Another risk to manage is time. Open-ended timeframes will wear everyone down. Create some time pressure on the process to drive it forward, and don’t allow yourself to be dictated to on the deadlines.
A business which has recently been acquired faces many challenges during integration with the buyer. To manage the process and see the business succeed, it’s important to understand the reason for the acquisition, whether you are the acquired or the acquirer.
When Day was acquired by Adobe, it was clearly a software purchase, so the integration needed to be quick so that the customer only saw one ‘face’. It’s difficult to do, particularly with big cultural hurdles of a Swiss and US firm coming together.
Netcentric was very different, as Cognizant couldn’t do what Netcentric did, they were buying the way we work. Cognizant has a mantra – ‘do no harm when you acquire a company’. We actually agreed to preserve our approach in pre-acquisition talks and the integration was very light. It’s been business as usual, we’re still Netcentric, only it’s better now because we have the financial security of being a big group with a larger cash flow. We’ve merged where it made sense to do so, such as the legal and finance teams, and we’ve taken advantage of Cognizant functions where possible, such as the new delivery centre in India. When you’re thinking about how to sell a business, the aim is not to disturb staff or customers. It comes back to remembering why you bought the company and ensuring you protect that.
To learn more about Richard and his career in finance, take a look at this article on his career path.
If you are looking for your next career move in finance, or you have a role to fill at your organisation, please get in touch on: + 44 (0) 20 3637 7808.