Kevin Briggs

Interim Financial Management

Business integration and start-ups

I have brought these two under the same heading as the required skillsets are similar; the same applies where an organisation ends an outsourcing arrangement and brings the activity back in-house. At an operational finance level, both scenarios require basic financial skills.

Case studies

Interconnect Ltd had a turnover of £3.5m pa and staff of 40 when I integrated it into Securicor Telecom with a turnover of £6m and 75 staff (1994 prices). Subsequently another business with a turnover of £1m and 20 staff was acquired and integrated. My involvement with this business was as a start-up in the months following its commencement to trade and subsequently a business integration with its sale to Securicor.

· Marconi Optical Components and Bookham Technology plc both had a turnover of £15m at acquisition and both had staffing of about 300 each (2003 prices).

· Real Time Control (turnover £5m, staff 35) was acquired by DigiPos Group (turnover £35m at 2003 prices). This particular business was originally part of Real Time Control plc before its acquisition by NB plc (which has since been acquired by British Telecom), from whom DigiPos made the purchase.

· In 2005, Torex Retail (turnover £40m) acquired Anker Systems (turnover £25m). In this case I was required to relocate the finance functions from Witney and Bolton to Banbury whilst implementing a new computer system (Tetra CS3) at that time.

· The IT function of J Sainsbury plc spends about £260m pa (2006 prices) and about 550 staff.

· The Olympic Delivery Authority is the body tasked with the construction of the transport and venues for the London 2012 Olympics, and my time there was during its start-up phase

Similarities of start-ups, acquisitions and reversing outsourcing

The reason why the activities of business integration, business start-up and in-sourcing are similar is the a need to establish internal controls, reporting structures, forecasting and usually a computer. Contracts may need to be novated and sometimes new legal structures established; often there are implications for corporation and value added taxes.

Application of my experience to case studies

In my paper Acquisition of SME's, I have summarised the sort of steps that should be taken in acquiring a business and then subsequently explained how mistakes made at the pre-acquisition stage have had an impact on the post-acquisition implementation.

Culture

In integration scenarios, a lot is made about culture. Phrases that use words such as "fit" and "change" are used often and the word itself is used most often of all, usually with little thought as to its meaning. For an interim starting an assignment, culture is always an important consideration, but with a post-acquisition integration, it is most important because there will be at least two cultures (the acquired and the acquiror) and how these interact until one subsumes the other is most important. A discussion about culture appears in this paper.

What's fun about a start-up

Start-ups demand almost all skills of the financial manager, particularly in an SME environment. The great things here are the ability to make your mark and to use creativity in establishing something new. Examples include:

· set up policies and procedures - often in association with other disciplines such as HR in drafting staff expenses and relocation policies and sales in drafting a credit policy

· make sure the tax authorities are happy, for example in establishing PAYE settlement agreements, expenses dispensation arrangements (in association with HR) and VAT governance. There may be other tax issues that are specific to the business that need to be set up, particularly if the organisation is partially exempt (as happens in the public sector) or there are special VAT schemes or if the organisation is property company and needs an "opt-to-tax" policy

· implement computer systems and setting up the management reporting that satisfies business managers and owners

· create and agree the organisation's first budget

· its possible that the organisation may need to raise funds in its early life

· set up the company secretarial function and other corporate governance processes

· review supplier and customer contracts. These may have important connotations for disclosure in accounts (particularly if there are changes to be made in accounting frameworks such as from UK GAAP to IFRS) and may require finance input to the negotiation of such contracts by sales or procurement management.

· ensure that the business has the appropriate financial controls in place

· the first year's statutory accounting needs to be concluded successfully. A key part of this is the handling the relationship with the organisation's external auditor, particularly around agreeing accounting policies. In the public sector there may be other aspects to setup, such as measuring BVPI8 and KLOE.

I have worked in start-ups in both the public sector (the ODA) and the private sector (Interconnect and Automatic Minibars)

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