F&A Priorities: Enabling M&A Success

Today’s business environment is more dynamic than ever. Business leaders are focused on strategic initiatives to position their companies for long-term growth, to gain competitive advantage, and to drive shareholder value. 

Top of mind for many business leaders are topics like recruiting and retaining top talent, remote work enablement, and digital transformation, to name a few.

As business leaders focus on making strategic decisions around these areas, accounting teams are being increasingly relied upon to provide data and insights and to serve as strategic advisors to the business.

This post is part of a series discussing areas of focus that require active accounting input, why it matters to accounting leaders, and the risk of doing nothing.

According to the IMAA, the volume of mergers and acquisitions (M&A) has grown an average of 5.9% per year since 1985. M&A is increasingly becoming an essential component of strategic business models, enabling business leaders to achieve their objectives, such as revenue and cost targets, and remains an ambitious goal for many organizations, regardless of market conditions.

That should come as no surprise. M&A offers companies an opportunity to accelerate growth and scale business operations, often more quickly than if they had attempted to do so organically. In addition, there are many other benefits M&A transactions deliver, including:

• Cost efficiencies

• Increased market share

• Competitive advantages

• Tax benefits

The M&A market fluctuates based on factors including economic conditions, geopolitical uncertainty, and other changing market factors. Most notably, M&A outlook tends to be most favorable following times of uncertainty due in part to diminishing valuations. PwC notes that following the Great Recession, the US M&A market experienced the longest expansion period in 150 years.

So, what does this mean for finance and accounting teams? Both from a compliance and an operational standpoint, finance and accounting professionals are experts and catalysts to ensuring an effective and successful merger or acquisition. More importantly, these teams are tasked with supporting these strategic initiatives while still maintaining critical day-to-day responsibilities even during periods considered highly stressful, like a recession.

It sounds straightforward—establishing and maintaining preparedness will directly impact the outcome of your merger or acquisition. However, M&A transactions are incredibly complex, requiring businesses to dissect and assess every component of the combining entities to meticulously determine the best possible fit, even when one may not readily exist.

Companies often assign dedicated teams or hire third parties to drive M&A success by performing due diligence, identifying combination opportunities, or executing on integration strategies. In many cases, employees across the organization also have added responsibilities to support the M&A deal cycle. With M&A transactions taking as little as three months, the earlier these teams can be involved, the more likely the success of the transaction will be. 

Finance and accounting is a critical, strategic advisor before, during, and after a business combination. At the core of a complex M&A transaction is the need for significant due diligence to confirm the evaluation is based on accurate data and numbers to prevent a poor decision.

Additionally, M&A transactions require substantial effort related to combined financial statements, compliance requirements, and ensured timeliness and accuracy of both. This includes strategically aligning technical accounting policies, the chart of accounts, technology stacks, accounting processes, and people, to name a few. To do this successfully, F&A must be involved from the early stages of the transaction to assess, prepare, and execute a plan for key people, processes, and technology.

A Harvard Business Review study found that 70-90% of M&A transactions failed to deliver value for shareholders. A lack of readiness and integration complexities may hinder the achievement of strategic objectives and reduce shareholder returns. Not involving finance and accounting teams early in the deal cycle may lead to misaligned or unachievable goals including growth, synergy, and process targets. According to McKinsey, when the CFO isn’t strategically involved early on, M&A transactions are 65% less likely to achieve synergy targets.

Finance and accounting teams play a crucial role in supporting these objectives, but manual accounting processes may impede their ability to act as agile strategic partners. Having complete and accurate entity-specific and consolidated financial data is paramount to the success of a business combination. That process depends on accountants from multiple organizations performing critical tasks in a disparate, decentralized environment. Not only must accountants continue to close the books accurately and on time during a merger, but they’re also called on to provide new insights and information relevant to the transaction. 

The complexities of not being effectively prepared can ultimately lead to an inability to produce timely and accurate financial results, which can impact M&A success, employee morale, productivity, and lead to potential fines and penalties.

Improving your accounting processes is essential to readying an organization for an M&A transaction. Facilitating workflows between legacy entities, including their related systems and people, can increase manual process steps, touch points, and overall risk. BlackLine empowers organizations to meet their M&A finance goals with technology that applies automation, control, and visibility holistically across legacy and disparate financial structures.

BlackLine establishes a strong control framework, auditable workflows, and automation of error-prone and repetitive tasks to increase alignment across legacy entities and considerably increase the accuracy and efficiency of accounting processes during and after a merger or acquisition, including:

• Unifying underlying data from legacy systems, like ERPs, and automatically consolidating data so users can easily execute close activities, like account reconciliations, and prepare consolidated views of financial results.

• Automating core accounting workflows with capabilities that apply rigorous systematization, such as automating transaction matching, to reduce manual steps and process inefficiencies.

• Enforcing control and visibility with preventative and detective controls including defined segregation of duties, structured roles and responsibilities, and process standardization that assure the accuracy and completeness of financial results.

• Optimizing finance and accounting capacity so teams can focus on more strategic and value-added work by limiting manual steps and process inefficiencies.

Most importantly, an M&A transaction is often the start of fast-paced growth and increasing demands on finance and accounting teams. BlackLine empowers organizations throughout the M&A process and scales as they grow, unlocking more productivity and efficiency over time, long after the deal closes.

Mergers and acquisitions provide opportunities for organizations to accelerate growth, combine operations, and reduce cost. Involving finance and accounting early in the deal cycle can help companies meet and even exceed expected goals. With BlackLine, F&A teams can streamline legacy accounting and realign capacity to act as strategic advisors before, during, and after a business combination.

Learn more about how BlackLine allows your combined accounting teams, chart of accounts, and processes to continue and evolve, utilizing industry best practices.