April 13, 2021

Increasing M&A Activity Highlights Challenges for Finance & Accounting

We’re a year into the global pandemic. Growing numbers of CFOs are seeing stabilized finances and mounting cash reserves—and in many cases, they’re evaluating a surge in M&A activity in 2021.

As Duncan Smithson, senior director of M&A at Willis Towers Watson noted, “Pent-up demand, ample funding, ultralow interest rates, and confidence returning to boardrooms indicate conditions are ripe for one of the biggest M&A years on record.”

And as investment advisors Banyan Hill said recently, “The great news is that market conditions right now are ripe for increased M&A activity… a lot of great, profitable US businesses that might have looked into M&A are now sitting on plenty of cash.”

Exactly what to do with that cash seems to present a happy problem. But Molly Boyle, BlackLine’s finance transformation expert cautions that companies exploring M&A activities should be aware of the M&A-related challenges that arise when the parties to a transaction have manual finance and accounting practices.

“Spreadsheet-based processes, for example, can make it difficult to access information, assess roles and responsibilities, and integrate processes across entities,” she says. “Further, a lack of standardization can impact productivity and introduce unnecessary risk of error.

Automation: A Jumping-Off Point

By contrast, centralizing and automating processes in the cloud can provide both a quick win and a foundation for longer-term transformation for companies engaging in M&A activities,” says Boyle.

Adopting financial close solutions helps companies integrate processes for account reconciliations, task management, and other activities in a single, unified platform. Leading practices and controls such as templates and segregation of duties are embedded in the platform and consistent across all facets of Accounting. And all processes are visible to managers for tracking activities across resources, departments, and geographies.

“With process automation, Finance and Accounting—and other stakeholders—can see how their combined entities are performing in real time,” Boyle says. “They can make better business decisions when they don’t have to wait for month-end for results and insights.

“This creates tremendous competitive advantage. By keeping a close eye on the numbers, executives are better able to identify synergies, opportunities, and areas for improvement.”

Making M&A Work

The spike in M&A activity bodes well for forward-thinking CFOs and other executives, but it also adds pressure to those organizations that are still struggling with finance transformation. The reason: even though businesses are seeing a boost in post-COVID confidence, there are still formidable obstacles that were created by the pandemic.

Many supply chains have been compromised due to plant closings and conflicting legal complexities in pandemic-related regulations.

Large numbers of professionals, from accountants to auditors and C-level managers, have had to learn how to do their work from home. This has put substantial pressure on manual processes and systems.

“This is why it’s vital for businesses to initiate or keep up with accounting optimization initiatives,” says Boyle.” Companies are looking at new business models to survive and grow in the post-pandemic world. Those that have already solved—or are prioritizing—accounting automation will have substantial competitive advantages.”

Read our latest issue of BlackLine Quarterly for more stories like this that can help you move through the current disruption and into a more productive future.

BlackLine Magazine

Future of Work