Strategists who are responsible for helping carry out mergers and acquisitions (M&A) typically must manage a lot of moving pieces. The M&A process is lengthy, and there are a lot of questions to consider before deciding to acquire a business. But some of the biggest challenges arise post-acquisition and often center around financial metrics, systems and processes.
The financial post-close challenge
Financial transformations and getting the acquired business’s finance team up to speed with new technology and processes can be a big task for the newly formed merged business. In fact, these challenges arise so often that financial transformation efforts will frequently begin before an M&A deal is closed.
Management teams are increasingly attempting to determine when and how to conduct controllership transformation efforts in addition to transactional activity. Additionally, a growing number of businesses are beginning to concentrate on revamping their controllerships by implementing analytics, modernizing their systems and investigating specialized technologies.
Three common challenges for finance and accounting teams:
1. Undeveloped or outdated financial practices that aren’t GAAP compliant
It is common among merging companies to lack fully formalized accounting metrics or processes because they are using outdated finance and accounting technology or even manually collecting data.
2. Disparate technology systems
Businesses that are struggling with financial integration will often lack confidence in the accuracy of their data because they have multiple systems that aren’t integrated with each other. In most cases, businesses with disparate technology systems can’t provide reconciling subledgers.
3. Lack of confidence in data
A lack of trust in data leaves many finance leaders and controllers with a difficult time executing deal activities (ex. deal accounting, post-transaction auditor reviews). This trend is resulting in deals that are focused on investing in optimized controllership systems and enhancing financial processes within the new organizational structure.
Three ways to prepare for these common challenges:
1. Proactively plan
Proactive planning starts with visualizing where you want your company to go in as much detail as possible. Upgrading to a robust cloud-based ERP solution can help your business turn a potential M&A deal into a deal-maker. Having a cloud-based ERP may appeal more to the buyer as it is more cost-efficient compared to fixed-cost on-premises solutions. What’s more, having a cloud-based ERP system may offer more flexibility after a deal is made due to the regular upgrades it comes with, its scalability and increased system capability.
2. Transaction management
Businesses need to ensure that their systems are set up as efficiently as possible. It is important for companies to be able to capture their data in a structured manner and automate manual and error-prone processes. Having the right data in the right place is critical to ensuring confidence in accurate data about your business.
3. Audit
When was the last time you had an audit done on your books? Get a head start and increase the reliability of your financial information. Having an audit done will help give the potential buyer more confidence in acquiring your business as well as enhance their knowledge of your financial standing.
How we can help
M&A’s aren’t always a smooth process, especially if your business hasn’t taken the necessary steps to prepare. By undergoing advanced preparation, your business will be better set up for success at every stage of the M&A process. To learn about how to enhance your M&A process, contact us today.
