CohnReznick joined the New York chapter of the Association for Corporate Growth (ACG) for its 2021 inaugural event, kicking off a series focused on the corporate development officer (CDO). CDOs from several companies and industries participated in a roundtable discussion covering a range of topics.

The following are the top points of discussion from the event.

The role of the CDO 

Corporate development officers play a key role in the strategic initiatives and revenue growth of their firms. Depending upon the company, their responsibilities can vary, but they tend to focus on areas such as M&A activity, strategic partnerships, and other business development functions. The background and experience of the CDO tends to be fluid and less prescriptive than other job descriptions. 
Many CDOs begin their careers in investment banking, private equity, finance, or operations, and are often not aligned to the industry they find themselves in. They tend to work with the executive management and operations teams, bringing their financial and dealmaking experience to the industry their company operates in. 

A successful CDO tends to be a “jack of all trades,” possessing keen business acumen, a solid finance/financial background, and strong interpersonal skills. Often, based on their skills and the experience they gain along the way, CDOs ultimately land C-suite positions within their organizations. 

One size doesn’t fit all

The function of the CDO is not standardized. Rather, each organization generally looks at the role a bit differently. Some businesses combine strategy and corporate development, with the CDO working with business unit managers to set and then lead the execution of the strategy. Other companies have a separate strategy group. In this case, the CDO has limited input into the strategy but is charged with executing it, working with others in the organization. For smaller companies, there tends to be more of the former than the latter. Regardless of size, companies generally do not pigeonhole their CDOs into an M&A-only function – the CDO is actively involved in exploring new markets through organic growth, creating strategic alliances, and driving new product development. 

Adaptability drives value

The COVID-19 pandemic has created a slew of new challenges for CDOs. Those able to adapt their roles to the changing needs of their companies during this tumultuous period will continue to drive value. 

For example, establishing new relationships – with investment banks for deal sourcing, with management teams from investment targets, and with new leaders in their organizations – has taken on a new dimension in today’s “virtual” business environment. In-person meetings and interactions, which we previously took for granted, have become virtual video meetings. For some CDOs, this has hindered the overall process. Others, however, have expressed that they have established meaningful new relationships through online interactions. 

While things slowed down in the early stages of the pandemic, as time went by, companies went about their business, and many managed to close transactions. In almost all situations, it took only one in-person meeting with key stakeholders to get those transactions done. 

CDOs and the virtual business environment

There are several best practices that CDOs can employ to help them engage, build trust, and drive culture, despite the limitations of today’s virtual business environment. In addition to always acting respectfully and professionally online, creativity also comes into play. Virtual happy hours can replace dinner meetings and a “drink at the bar.” But most CDOs feel that every new relationship or transaction ought to include at least one face-to-face meeting.

As setting expectations and communicating to employees become even more important, post-integration planning needs to begin sooner. Virtual town halls, welcome packages, a centralized portal for all relevant information, and the ability to respond to FAQs in real time have become the order of the day. Gone is the spontaneity one enjoyed in a typical office environment.

Moving forward: Critical success factors

For CDOs, being successful today and, later, in the post-pandemic business world is tied to a set of operating principles they need to help drive within their companies:

• Ongoing engagement with business unit leaders (BULs). CDOs rely heavily on their BULs to source opportunities and align on strategic priorities. In turn, the BULs rely on CDOs to execute and facilitate. BULs and CDOs need to be fully in sync in areas such as establishing criteria for M&A, including revenue and EBITDA thresholds. 
• Having signoff and support from the board of directors.
• Having defined goals and a framework to measure success. KPIs for this may include pricing/valuation, the structure of a deal, managing transaction costs, the number of transactions, etc. Longer-term outcomes such as integration and synergy realization also apply, and maintaining a “repeatable playbook” will help.
• Setting expectations for post-closing responsibility. BULs are accountable for building and then signing off on the business plan. This includes setting forecasts, determining synergies and operational efficiencies, and the execution of such plans. CDOs should never take responsibility for these areas. 

Competing with private equity has become more challenging as the valuation gap narrows. Flush with cash, private equity firms are willing to pay for the “synergy” value that a strategic buyer may also be willing to pay. CDOs typically believe that selling an established culture, employing a long-term view, maintaining legacy, and not “being flipped” in a 3- to 5-year time horizon gives them an edge. 
CDOs who find themselves working in a PE portfolio company are generally looking to build that company for the long term. To compete in markets where demand often exceeds supply, their private equity owners can no longer focus all their efforts on transactional elements and financial engineering. They need to act more like strategic CDOs to succeed. 

Contact

Claudine M. Cohen, Managing Principal, Transactions & Turnaround Advisory

646.625.5717