Should You Budget for M&A?
Lessons from 15 acquisitions and a $5.1B exit
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We’re trying something new: Leveraged Moves — a quick hit of who’s taking the CFO seat at PE-backed companies. Scroll down for the latest from Meltwater, Liquid Death, and Citrin Cooperman.
Many of us find ourselves in the teeth of budgeting season: reflecting on what worked, laying out next year’s goals, fine-tuning levers in our five-year value creation plan.
One of those levers is inorganic activity.
Which begs the question: should you budget for acquisitions?
Here’s the CFO’s dilemma: Your sponsor expects aggressive growth. M&A is in the value creation plan. Your FP&A team wants line items and targets. But deals are unpredictable.
So do you bake in phantom revenue and EBITDA that might not materialize? Do you sandbag organic targets to give yourself room? How do you report variance when you “miss” on something you never actually controlled?
I asked Rebeca Sanchez Sarmiento, former CFO of Dotmatics, a leader in lifesciences R&D software. This year she led a $5.1 billion sale of the company from Insight Partners to Siemens. During the hold period, they executed more than 15 M&A transactions—a crazy number by any standard.
“From our standpoint, M&A is the number one driver of value creation,” she told me. “We are constantly looking at targets and want to be able to be in the best position possible to bring more products and expand the scientific applications of our technology.”
Given that track record, I assumed they’d developed a sophisticated budgeting process for M&A.
Her answer surprised me:
“No, we don’t. We just assume that inorganic growth comes when it comes and we layer it on.”
The Strain is Real
That sounds clean in theory. In practice, it creates real operational strain:
“That also translates to us constantly evolving our thoughts midyear around ‘How do we want to organize the company? How do we want to present segments?’ So there’s a lot of flexibility that’s required.”
CFO speak for: They’re reorganizing the company mid-year. Repeatedly. You could even say constantly.
When I pressed on this, she was candid:
“Restatements are a blessing and a curse, and I can tell you that we are constantly doing them much to my accounting team’s chagrin.”
But here’s what makes it work: They don’t budget for deals, but they do budget for capability.
80-20 is dead. Long Live 70-20-10
Her team of five FP&A people manages 16 separate P&Ls. They use what she calls the “70-20-10” approach:
70% of focus: Headcount. Ultra-specific workforce planning because people drive everything: sales capacity, product development, integration work.
20% of focus: COGS and cloud hosting. The infrastructure that scales with growth.
10%: Everything else. They explicitly avoid getting lost in the long tail of vendors and miscellaneous spend.
“Be ultra-specific when it comes to headcount, then think about COGS,” she explained. “Everything else kind of falls to the bottom because it isn’t within that 70% of what really drives the needle.”
What They Actually Budget For
Rather than forecasting phantom deal revenue, Dotmatics invests in integration infrastructure:
“I try to have a very small team that comes in and just focuses on M&A integration.”
That team has built a playbook:
Pre-work before close. “I bring in my director of FinOps, I bring in other people from the technical accounting side early during diligence.” They’re identifying vendors, SKUs, revenue frameworks, before ink dries.
ERP integration immediately. “The number one thing I’m focused on is how do we get them into our ERP—we use NetSuite—as soon as possible. We’re now at a point where we’re prepared enough to actually be doing AP and even AR day one or within the first 30 days.”
Shared services for back office, independence for product. They integrate HR, legal, and accounting immediately, but keep R&D and product teams independent to preserve domain expertise and minimize disruption.
If we’re being real, they budget for the muscle to absorb deals quickly, not for the deals themselves.
When the Alternative Makes Sense
I’ve heard of some larger companies budgeting for M&A using “T-shirt sizing… e.g., two XL deals per year ($500M+), one large ($250M+), three smalls ($50M+).
Rebeca had heard of this approach:
“I think it works for bigger companies of that nature. Certainly in healthcare you’ll see the same situation. For us, because M&A tends to be more opportunistic, it’s harder to have that level of specificity.”
The distinction matters: T-shirt sizing works for programmatic, repeatable M&A (roll-ups, tuck-ins). It breaks down when deals are opportunistic.
What This Means For You
As you finalize 2026 budgets:
Don’t Budget for Phantom Deals
Baking in M&A revenue you can’t control creates reporting headaches and misaligned incentives.
Do budget for integration capacity:
Dedicated integration team
Pre-close diligence that includes your technical accounting and FinOps teams
ERP infrastructure that can onboard acquisitions in 30 days
Organizational muscle to reorganize mid-year without breaking the company
Focus your forecasting on what you control:
The 70-20-10 rule keeps you from getting lost in noise. Headcount drives everything. Infrastructure scales with growth. The rest is rounding error.
Align with your sponsor now:
Have the explicit conversation about how M&A will be treated in the plan, in reporting, and in performance evaluation. If deals are opportunistic, you need agreement that flexibility is the feature, not the bug.
The companies that make serial M&A work aren’t the ones with the most sophisticated deal forecasts. There are no style points for fancy excel models that can’t survive market dynamics and timing. They’re the ones with the operational muscle to absorb complexity without throwing off the rest of the org’s pace.
Leveraged Moves
Recent C-suite shifts across the private equity landscape… because people moves are performance levers too.
Meltwater, a global provider of media, social, and consumer intelligence solutions, appointed Tres Thompson as Chief Financial Officer. Thompson brings deep experience guiding private-equity-backed companies through high-growth and exit stages, with prior finance leadership roles at HighRadius, Velsera, and Symplr. Meltwater was acquired by Marlin Equity Partners ($8B+ AUM) in 2023 and operates in over 20 countries worldwide.
Liquid Death, the edgy, fast-growing beverage brand, appointed Ricky Khetarpaul as Chief Financial Officer. Khetarpaul previously served as CFO of Health-Ade, where he helped guide the company through its acquisition by private equity. Prior to that, he held senior finance roles at Lavazza North America and PepsiCo. Liquid Death was most recently valued at $1.4 billion following a $67 million funding round led by SuRo Capital and Science Inc., and continues to expand beyond its core water products into teas and energy drinks.
Citrin Cooperman, a national professional services provider for private, middle market businesses and high net-worth individuals, named Lydia Brown as CFO. Brown most recently served as CFO for global consultancy HKA. Blackstone recently acquired a majority stake in Citrin Cooperman from New Mountain Capital, valuing the firm at about $2B.
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It's interesting how you've really pinpointed the core of the CFO's M&A dilemma. What if the 'phantom revenue' isn't just about aggressive targets, but the inherent limit of any forecasting, even with advanced AI, when it comes to the human side of deal-making? Makes you wonder where that sweetspot truly is.
“They explicitly avoid getting lost in the long tail of vendors and miscellaneous spend.” Nice