📬 Dumpster Fire: Measuring M&A success

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Before we get into it, I’ve got two asks for you this week:

First, it’s your turn to ask a burning question.

Answering your questions is one of the most fulfilling things I do. Hit me with your most challenging CFO issue, and you could be featured in next week’s Mailbag.

👉 Send me your questions by filling out this form.

And second… show off your AI skills to the CFO Secrets audience.

Soon, I’ll be launching a competition to seek out the most creative and impactful uses of AI in finance. If you’ve used AI in your finance team and have seen real impact (saved time, improved output, or just made life less painful), I want to talk.

👉 Drop your details here if you’re curious. I’ll be in touch.

Now, on to today’s Mailbag

We’ve got some great topics today. Here’s what’s on tap:

Now, let’s get into it.

Matt from DMV asked:

I'm the CFO of a PE-backed roll-up in the consumer retail space. I am trying to facilitate a transition from a finance-owned budgeting & forecasting process to a true bottom-up process with full operational buy-in. The challenge is that the site managers we acquire generally have no experience with forecasting and require a lot of "collaboration" from finance to produce a reasonable outcome. I get the sense that while we are, on paper, going through the steps of a bottom-up budgeting process, the result is little different from a finance-led process, both in terms of output and cultural alignment.

To hopefully facilitate a more productive 2026 planning cycle, I've invested in a finance-led P&L education series for site managers and have implemented a monthly business review structure with each site.

Beyond these, how would you go about threading the needle between finance-informed accuracy and operational buy-in when dealing with less experienced operators (particularly those we inherit via acquisition)?

Matt from DMV, I love this question.

It’s right at the heart of the challenge a CFO faces in a scaling business.

You’re doing the right things. Pushing toward a true bottom-up process is exactly where you want to end up. Operators who understand their P&Ls and own their budgets are the foundation of real accountability. Your P&L education series and monthly reviews are exactly the right building blocks.

But here’s the reality: not everyone is ready for it. Especially in roll-up models with many small sites. Your average store manager might be excellent operationally, but they’re not trained to think beyond scheduling staff and managing stock. The juice may or may not be worth the squeeze at that level.

The trick is finding the right altitude for ownership.

Start by asking yourself at what level of the organization it’s reasonable to expect P&L understanding and ownership. In large-format retail like Walmart or Costco, that’s absolutely the GM and their senior team. But in a network of smaller sites, it might not be the store GM. It could be the regional or area manager who oversees multiple locations.

So start there. Push accountability for assumptions to a level in operations where P&L ownership makes sense, and make those leaders responsible for aggregating site-level input. Let them decide whether their store managers should be hands-on or simply contribute key operational drivers.

If your regional leaders are strong, this will raise the organization’s financial IQ over time. If they aren’t, it tells you something important about the depth of your operations bench.

Also, remember that bottom-up budgeting is as much about culture as capability. If the business still sees budgeting as “finance’s job,” no amount of training will fix it. The cultural shift happens when operational leaders start believing they own the number, not just deliver against it.

Think of it as a staircase of maturity:

You’re climbing those stairs one cycle at a time, and you may never reach Level 3 everywhere. That’s fine. What matters is pushing accountability as low as the organization can handle without losing rhythm.

Get it right and, with every cycle, you’ll build muscle inside the operations function and gradually re-engineer the management system of the business.

TLDR: You’re on the right track. Not every manager can or should own a P&L today, but your job is to move the whole organization one level closer each cycle. Find the right altitude for ownership, train for it, and build maturity from there.

Matt from the United States asked:

I've seen you mention that a lot of M&A is a dumpster fire. I tend to agree, and am wondering which metrics you lean on to put numbers to the assumption.

My company is a serial acquirer and purchases almost every target with cash on balance sheet. How do you evaluate whether an acquisition is financially successful post-closure? Do you think the traditional EPS accretion/dilution, ROIC, IRR, etc., methods suffice?

Matt,

You’re right. I have said that, and I’ll say it again: a lot of M&A is a dumpster fire.

In my experience, management teams lean on M&A far too often as the answer to their problems. It’s much easier to convince yourself you can run someone else’s business better than to fix the problems in your own. And few things distract management more than integration work.

The truth is, clean decision-making in M&A is rare. It’s full of ego, bias, and asymmetric information. You can justify almost any price with a few spreadsheet tweaks. In one of my earlier playbooks, I showed how just lifting the growth rate by 1 percentage point and reducing the discount rate by 1 could double a valuation. You can make the answer whatever you want it to be to justify a deal you have already decided you are going to do.

So, how do you really measure success?

If you’re a serial acquirer, forget the textbook metrics. EPS accretion, IRR, and ROIC are fine for a deal model, but they tell you nothing about execution. Especially for a cash acquirer, where it’s opportunity cost that really matters.

I’d focus on one simple thing: delivery against the business case, deal by deal. Treat it like a post-implementation capex review.

When you approved the deal, you had a set of assumptions. A standalone forecast for the acquired business and a synergy plan for what you’d do with it.

Did you deliver it?

If the answer is yes most of the time, then your M&A machine works. If the answer is no, then it doesn’t, and that’s your metric.

If you aren’t set up to measure that, then that’s on you. You need to be able to isolate the performance of each acquisition post close to see if the numbers you bought into actually turned up in reality.

And while you’re at it, don’t just look at the target, look at the acquirer. Core business performance often dips after a deal as management bandwidth gets stretched. If your base business stalls every time you buy something, that tells its own story.

So yes, a lot of M&A fails, but not because the math is wrong. It fails because the assumptions never get tested, and accountability for delivery disappears after the press release. Especially if you are in the habit of generous M&A accounting to wash away ‘one-off’ costs.

TLDR: Measure M&A success by whether your business case and synergy plan actually happened. And whether your core business keeps performing while you’re doing it.

Burning Cash from Bay Area, California asked:

I'm the head of finance at a tech startup. We closed our Series B a few months ago. The round was led by a growth equity firm (ie, not a Sand Hill Road VC). We had our biggest revenue months ever leading up to the round closing, but since then, our top few customers are contracting, and monthly revenue is down ~60% from highs.

At the same time, we've done a lot of hiring, especially in GTM and product/engineering. Our CEO is convinced we need to build fast, but we don't have a clear view of what the ROI is from the R&D spend (ie, no clear visibility into if we spend $X to build Y, it will translate to $Z of incremental revenue). We have a decent runway (18+ months), but our new investor is pushing hard for us to do a major RIF, grow slower, and control spend while we figure out what to do.

I've always had to be the adult in the room and push back on wasted spend. I agree with our investor here and not the CEO. Tricky situation. Feel like I need to support the CEO (my boss), but don't want to look like a clueless asshat with the board (a finance leader with no control over spend who is ok burning through millions of dollars).

How do I approach this at our upcoming board meeting in a couple of weeks?

You and your investor are right. Your CEO is wrong.

If revenue is down 60 percent and hiring is still accelerating, something fundamental has broken in the model. You cannot spend and scale your way through that kind of contraction. You need to pause, diagnose, and reset.

The first step is understanding what’s really going on. Is this churn, pipeline softness, longer sales cycles, or pricing pressure? Is there a structural change in your unit economics that means your previous growth assumptions no longer hold? Until you answer those questions, there’s no justification for continuing to hire and burn.

You are right to support your CEO, but your first duty is to the company. So, your real question is how to navigate the board meeting.

The trick is to engage your CEO before the meeting. A strong CEO-CFO relationship allows disagreement in front of the board without damaging trust. What destroys trust is surprise. Never blindside your CEO in a boardroom.

Sit down with them early. Be clear that you’re not hiding behind the investor’s opinion. Share your own. Be direct about the financial reality and the need to course correct. Use data to make your point: headcount growth versus revenue contraction, spend per dollar of revenue, or cash runway under current versus reduced burn. Good CEOs can handle facts, even uncomfortable ones.

If your CEO listens and adjusts, great. If they don’t, you still have to protect your credibility with the board. Tell your CEO, respectfully, that you will be transparent about your view at the meeting. You can frame it without open conflict:

“I know we’re not fully aligned yet, but my view is that we need to slow hiring and review spend until we understand the change in our revenue profile. I’ll be open about that with the board.”

That’s fair, professional, and protects both of you. Good CEOs will respect that (and you) more even if they hate it at the time.

Finally, think about how to present the problem to the board. With a 60 percent drop in revenue, the numbers will speak for themselves.

You need to show the board that your view is rooted in the business, not in investor politics. Align with the data first, not the investor’s opinion. This signals political intelligence.

Keep the focus on data, diagnosis and discipline. Show that you are taking control of spend while the business stabilizes.

TLDR: You cannot spend your way out of a broken growth model. Get your CEO aligned if you can, but be prepared to stand on the facts if you can’t. Protect the company first, the relationship second, and your credibility always. But handled well, there is no reason you can’t protect all three.

A few of the biggest stories that every CFO is paying close attention to. This is the section you might not want to see your name in.

Unsurprising headline here… in the most recent Boardroom Brief newsletter, we shared how CFOs are responding to the uncertainty of tariffs and the ongoing trade war.

Per the latest North American CFO Signals survey, “Fifty-four percent of CFOs say the biggest challenge to quickly adjusting prices is that their organizations lack a cohesive strategy or plan.”

Andres Elizondo, former CFO of the now-insolvent Builder.ai, is in the crosshairs of the US attorney’s office. Accusations of inflated revenues and circular transactions will do that to a finance chief…

It’s a drop in the bucket (about 2% of the KPMG audit workforce). I guess that means an earlier than planned move into industry for most of those folk. May be a blessing.

ICYMI, here are some of my favorite finance/business social media posts from this week. In the words of Kendall Roy, “all bangers, all the time.”:

Noted. Take care of your people…

A friendly reminder…

Let me know what you thought of today’s Mailbag. Just hit reply… I read every message.

The second edition of our newest newsletter, Boardroom Brief, dropped recently. We took a look at how CFOs are navigating tariffs and the ongoing trade war. Read it here.

On Saturday, I continued my Playbook series on private equity CFOs with a breakdown of the seven pillars of value creation. Check out the newsletter here.

Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.