‘The Most Important Role CFOs Play In M&A Is In Integration’

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Novelis CFO Devinder Ahuja talks about finding key synergies, tying sustainability to P&L and why finance chiefs have a uniquely wide-lens view of operations.

Devinder Ahuja is senior vice president and CFO of Novelis Inc., an Atlanta-based subsidiary of India’s Hindalco Industries Ltd. that rolls and recycles aluminum. In the interview below, Ahuja shares how CFOs can help companies get the most value from acquisitions, as Novelis just completed a $2.8 billion deal for competitor Aleris Corp. in Beechwood, Ohio. Ahuja also shares his thoughts on how finance professionals can play a role in talent development, tying sustainability and purpose to P&L, and adding perspective to industry-wide initiatives.

What are the most critical ways CFOs can support company acquisitions?

CFOs should be strategic partners with their CEO, whether it’s determining opportunities and analyzing any risks of a potential acquisition, doing a complete financial analysis, structuring a financial transaction, determining how accretive it would be – making sure how any acquisition would work for their organization. CFOs also play an important role in raising the financing for any acquisition.

But the most important role that CFOs can play in an acquisition is in its integration, which is imperative to successful value creation. You need to capture synergies from a transaction, and this involves identifying areas where that can happen and putting people with the right skills into a cross-functional team and creating an action plan around them.

You can drive synergies by eliminating duplication of headcount and other redundancies, and achieving efficiencies from scale. This also gives a company the ability to drive savings in purchasing on the IT side. A CFO also plays a part in overseeing best practices on the operations side during an integration, which helps drive operational efficiencies. All of this drives value creation from an acquisition.

As CFO, you’re involved in your company’s mentoring and coaching programs – why should CFOs participate?

It’s imperative to provide the right vocational opportunities to key talents, as part of a solid succession plan. CFOs, like other leaders in a company, need to ensure we’re nurturing well-rounded individuals with both professional and personal skills, to really grow the company for the future.

You’re an enthusiast about tying sustainability and purpose to P&L — how can CFOs in any industry do this?

For us, sustainability is not a nice-to-have — it’s a must-have. It’s something we do for a living, as we’re the largest recycler of aluminum in the world. As we see more and more industries focusing on sustainability across their supply chain, infinitely recyclable aluminum is seen as a viable option to increase recycling and lower carbon emissions.

My role in tying this to P&L is determining the finance case for making investments in recycling. We have invested around $700 million in recycling investments and when we make these investments it’s important to consider building all the infrastructure like closed loop recycling with automakers to ensure recycled materials stay in the supply chain; establish a supplier network and relationships besides logistics to collect recycled materials and hire people who understand the recycling business.

CFOs in any industry should find ways to tie sustainability and purpose to P&L. It is not enough for companies to just show a favorable balance sheet anymore. We must also show a commitment to sustainability and purpose, as so many potential employees want to work for a socially responsible company. But we must do it in a way that shows investors there is a strategic element to sustainability and when done properly, is not a loss leader, but instead a potential new revenue stream. Running a business more sustainably is not only good for the environment — it is good for the bottom line.

You serve on the board of the National Association of Manufacturers — how can finance professionals impact organizations like these?

I think when you are in a position like CFO, you have a vantage point of view over the organization. You have oversight on every part of the business, you understand what policies need to be created, such as policies relating to employee wages, to taxes and to incentives. You also have a good view of any impediments, and what could make things better.

That kind of vantage view gives finance professionals on industry association boards the ability to educate and advise member companies about the things that could help them create more opportunities for employment, as well as for more productivity within their industry. This, in turn, could really enhance the competitiveness of that industry.

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