Internal audit’s role in strategic transactions

Role of IA during M&A

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There are four key areas where IA can play a crucial role in an organization’s M&A life cycle.

M&A life cycle

IA should review the deal approval process to make sure that short- and long-term goals are defined before the deal closes.

1. Strategy

M&A life cycle

An organization may have a target in its sights, but before it makes a move, IA should review the corporate strategy process, assess the risks to the organization and evaluate the business case process.
This will ensure that the organization can determine from the beginning whether the acquisition target aligns is the right fit.

2. Due diligence

M&A life cycle

IA can assess the valuation process, the risks and internal control environment and the synergy validation process.

These assessments will enable the organization to determine whether the price is right, and provide early insights on any risk or control issues that may be lurking beneath the financial statements.

3. Deal approval and close

M&A life cycle

Before the organization signs the agreement, IA can review the deal approval process to make sure that short- and long-term goals are defined before the deal closes.

IA can also assess the monitoring of the valuation process leading up to the deal close to determine the impact that any changes in the risk and control environment may have on the company.

4. Integration

M&A life cycle

IA should form part of the integration team and be involved in integration design and planning processes, integration project management and execution, and the transaction value assessment.

IA can also help to mitigate the risk of deal value leakage through the integration life cycle.