Aligned for growth: Reporting on post-deal success

Best practices for post-deal success

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Following the banking crisis of 2008 and ongoing Eurozone uncertainty, stakeholders such as investors, banks and private equity are looking closely for evidence of value creation after a transaction and apply a critical lens to business performance after a deal has been completed.

Our survey of 200 senior finance and accounting executives from 21 countries across Europe whose organizations have completed an M&A transaction in the last three years, looks at the approaches taken by companies in integrating their finance and accounting functions.

 

The ability of the finance function to communicate the financial impacts of an M&A transaction to stakeholders is more important than ever. Finance functions must be able to gather robust information at the right time, in the right GAAP, and with the application of the right accounting policies – or risk losing credibility with stakeholders.

What are the primary challenges facing accounting and finance teams post deal? How successfully are companies accessing the budgeting, financial accounting and management accounting information they need? Are they planning for the integration process as early as they could or should?

Our survey of 200 senior finance and accounting executives from 21 countries across Europe whose organizations have completed an M&A transaction in the last three years, looks at the approaches taken by companies in integrating their finance and accounting functions.

It uncovers challenges encountered, their causes and considers how to avoid these pitfalls when facing transactions in the future.

By comparing the experiences of respondents who have faced challenges during their finance and accounting integration, and those who encountered a smoother process, best practices to enhance post deal finance and accounting integration emerge.

 

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Plan well, plan early

• Though the majority of respondents started planning for post-deal accounting and finance integration before deal completion, 39% began planning only at, or after, deal completion.

• Planning at, or after, completion increases the likelihood of issues encountered in relation to management reporting, including the surprise of inconsistent management accounting policies across the target and lack of management reporting processes. Of respondents who had issues with management reporting, 77% experienced an inability of the target to produce timely management reporting.

Have the right team working with the right information

• Gaining access to financial data from the target company, and sharing it with key parties, was seen as a critical requirement for successful finance and accounting integration. Twenty-four percent of respondents who had issues with budgeting and forecasting indicated that they would aim for a better understanding of the target’s accounting policies and financial reporting processes during due diligence in future transactions.

• Of those who experienced no issues during finance and accounting integration, 21% identified the effective use and transparency of data between the two companies as their leading success factor for effective post-deal financial integration with 19% indicating that having a well-qualified and proficient team is critical.

Communicate and coordinate

• Clear and open communication between the acquirer and target, before and throughout all key stages of the transaction, was a high priority among survey participants for improving post-acquisition finance integration.

• A third (33%) of respondents who faced challenges with management reporting would, in the future, seek better alignment, coordination and communication between the two businesses in using existing management information and due diligence to better understand the target’s management reporting processes.

Scrutinize accounting processes and policies

• Of respondents who experienced issues with their financial reporting integration, 65% had major issues with differences in the application of accounting policies between the target and their own. In particular, 73% of finance directors (FDs) and controllers who had issues with management reporting cited management accounting policies different from their own as the source.

• Respondents highlighted the importance of aligning charts of accounts and management reporting templates, reflecting that the success of this activity affects the quality of the management reports that are subsequently produced, which underpin a company’s post-deal reporting.

Read on to learn more about:

The importance of timely planning

Optimizing accounting and finance integration

Scrutinize accounting processes and policies

 

 

 


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