What Does The M&A Market Look Like This Year?

Jim Cox, CFO of Clearwater Analytics
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Jim Cox, CFO of Clearwater Analytics, shares his views—and best practices if you decide to go that route.

Jim Cox, CFO of Clearwater Analytics, a provider of SaaS-based investment accounting, reporting and analytics solutions based in Boise, Idaho, is a veteran finance leader. Prior to Clearwater, Cox served as CFO of Glassdoor, where he oversaw the company’s preparation for initial public offering. He also served as CFO at Lithium Technologies and Advent Software.

Cox spoke with StrategicCFO360 about knowing the mindset of your partner in an M&A, if digital transformation will continue to grow in 2023 and how the power relationship between employers and employees is shifting.

Talk about how M&A was a popular tool for companies in 2022 and the outlook on the M&A approach in 2023.

With equity valuations down for many recent IPO companies, a number of private equity technology buyers have become active again in the market. This growing PE appetite is causing companies and their boards to think about all of their options—especially given the uncertain economy and a current public equity market that is rewarding more certainty over hyper growth.

Ultimately, although a PE firm may open a board’s mind to an acquisition, other strategic acquirers may offer the best result for the company’s shareholders, clients and employees, so I expect that there will be some strategic transactions this year.

What is most important to ensure acquisitions effectively mold into one seamless model? What are some best practices when two companies must cross-pollinate existing clients?

In my opinion, integration considerations should start from the very first meeting between teams that are considering joining forces. We always think about a variety of questions in regard to integration. For example, does the management team think about clients, the market, their growth opportunities and their employees in a similar way? Do we have a similar mindset? These things make the process easier.

I am not saying that you have to agree on everything, but you do have to understand how each other thinks, understand each other’s point of view and have an expectation for how you will decide these things. If you get those principles right, and then communicate those thoughts throughout the organization and integration teams, your groups will do a great job coming together in ways you may not have even imagined.

As CFO of a tech company, how will the evolution of the technology business model shape up in 2023?

Executives will continue to drive digital transformation within large organizations as they look to meet users’ expectations for a more consumer-like experience in their enterprise software. This means delivering the ability to see data when and how their users want it, so that ultimately, they can make faster decisions and communicate those decisions across the larger organization more easily.

To enable this experience, businesses will need to adopt technologies such as cloud delivery and embrace technologies that are cohesive within and among vendors. Accomplishing these goals will be a high priority moving forward and therefore, we see ecosystems around digital transformations becoming increasingly important in 2023.

Given the latest hiring and retention trends, how do companies maintain a strong workforce in 2023, especially amid market uncertainty?

What a difference a year makes! I think the power pendulum has moved from very much on the employer side back to the middle. Therefore, I think employers will start to ask a bit more of their employees—but still in a way that employees understand what is in it for them as well.

For example, in 2022, a lot of companies were afraid to say, “Come back to the office.” Now in 2023, we are saying to employees to come back to the office by emphasizing the benefits of doing so. Like how having people next to you every day helps you become part of the culture because you get to know your colleagues better as humans. It also helps you to build competency because you can easily learn how someone did something or can just tap the shoulder of someone in the moment when you have a question.

We believe that employees will enjoy their jobs and build their skills faster when they have an opportunity to be better. We will be brave enough to say to our colleagues, “Try coming back to the office again, we think you will like it and here’s why.” We are lucky to have hired so many great people during Covid—let’s all get to know each other!

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