Accounting can, and should, play a pivotal role where mergers and acquisitions are concerned.
When two or more companies are financially integrated, things can get very complicated. With the process typically involving a lot of meticulous preparation and financial analysis that’s precise in nature, for the average business – particularly those that are smaller in size – the stakes are often high.
To mitigate the risks often involved, guarantee compliance, and make the whole process painless, working with accounting services in Coral Gables is strongly recommended.
Let’s look in a little more detail at the role accounting can play in mergers and acquisitions:
M & A – just how complex is the accounting?
More than merely two companies blending together, mergers and acquisitions involve the aligning of two very distinct sets of systems, financial data, and policies. With accountants on board to help, financial statements can be evaluated with ease, while assets and liabilities can be accurately audited; both processes which are crucial in evaluating both entities financial health, spotting warning signs, and ensuring that regulatory standards are met throughout the entire transition.
Overall, proper accounting provides a robust foundation for both entities combined.
How important is due diligence in M & A?
Involving a detailed review of the financial records, legal obligations, tax history, and operational practices of the target company, due diligence is an essential stage of any merger and acquisition process.
Due diligence through the studying of income and cashflow statements, along with balance sheets, gives accounting professionals the opportunity to identify any liabilities that may otherwise have remained hidden, as well as any unreported assets; in turn, allowing for the making of decisions that are properly informed.
Determining a fair valuation
In the world of M & A, accountants play a vital role in the transaction by determining a valuation that’s fair. This tricky process must be handled with great care, and involves much more than mere financial analysis.
Forming the basis for healthy negotiations between buyer and seller, an accurate valuation is critical. Without one, the acquiring company may face a huge strain on their finances, or the acquired business may have their assets and future revenue, undervalued.
Accountants use their detailed knowledge of financial metrics to produce a pricing structure that’s fair and beneficial to both parties.
The streamlining of financial integration
Once the deal has been finalized, the next and typically most challenging phase, involves the merging of accounting systems, financial reporting standards and policies, that may differ greatly. When financial integration is mishandled, it can quickly and easily lead to significant inefficiencies, the missing of financial targets, and troublesome conflicts between the two teams.
From aligning financial processes and conducting employee training sessions, accountants can help minimize errors and enhance the overall coherence of all operations.
Compliance and tax liabilities
Often complicated and varying by jurisdiction, there are a number of tax and regulatory implications M & A’s may be subject to. Having an accountant on board can help ensure that both parties remain compliant at all times, and that any tax liabilities that may not have been foreseen, are avoided.
The establishment of a financial roadmap post-merger
With financial integration complete, the next job for an accountant is to set up a clear roadmap for the financial future of the new entity. Including new metrics for performance, budgeting, and capital expenditure planning, accountants work alongside management to set up financial goals that are realistic, while monitoring progress, and assisting the newly merged company in achieving success in the long term.
More than merely balancing the books, the establishment of a financial roadmap by accountants in Fort Lauderdale, gives the new company direction as well as accountability.
Sound accounting is essential for successful mergers and acquisitions, without which, the entire process can become lengthy, stressful, and incredibly risky for both parties.