Advice for M&A professionals tasked with a finance transformation

By Bryan Strickland

Those charged with helping execute mergers and acquisitions (M&A) must deal with a lot of moving parts — and not just the parts with dollar signs directly attached to them.

The majority of M&As feature digital transformation, process simplification, or the addition of automation to newly formed finance teams' processes, according to a recent Deloitte survey that looked at the biggest challenges related to finance transformations within M&As and suggested ways to prepare for some inevitable obstacles.

Deloitte polled more than 1,700 professionals involved in their organizations' M&A deals during a Center for Controllership webcast. When asked if their organizations undertake finance transformation as a part of M&A activity, 68.4% said they do. Just over half of those said the transformation efforts begin prior to the close of M&A deals.

"Increasingly, management teams are trying to discern how and when to pursue controllership transformation initiatives alongside transactional activity," Jenny Gilmore, a Deloitte Risk and Financial Advisory managing director in controllership accounting and reporting services, said in a news release. "Since most respondents expect their organizations to pursue M&A activity in the coming year, we suspect many organizations will also focus on transforming their controllerships, whether that involves modernizing workflow or ERP systems, adopting analytics, or exploring other special-purpose technologies to execute carveout financial statements or purchase accounting."

Nearly two-thirds of those surveyed (62.7%) said they expect their organization to pursue one or more M&A transactions in the next 12 months. When it comes to M&A transaction work facing affected finance and accounting teams, those surveyed cited as their greatest challenges over the next year:

  • Manual, outdated, or duplicative business processes;
  • Lack of appropriately skilled finance and accounting talent; and
  • Disparate or outdated technology systems.

"Fragmented controllership processes and disparate systems are common among merging companies, making it challenging for controllers and finance leaders to execute required deal activities like financial due diligence, deal accounting, regulatory reporting, post-transaction auditor reviews, and new business transactions," Maria Bunch, a Deloitte Risk and Financial Advisory principal in transaction execution, accounting, reporting, and integration, said in a news release. "As a result, dealmaking often results in investments focused on streamlining controllership systems and enhancing the flexibility and agility needed to transact, manage financial close, and report within the new company structure."

Deloitte's news release posed a series of questions that dealmakers can ask to help determine their controllership transformation needs:

  • What processes, systems, and roles are needed for "Day 1" post-transactional operations? What about for the first financial close?
  • How will the controllership function support the business in achieving overall transaction strategy? Is it currently positioned to do that successfully?
  • Will our common information model (chart of accounts) efficiently meet internal and external reporting before and after the transaction?
  • In the case of mergers or acquisitions, do synergies (e.g., process efficiencies and technology) exist in the controllership functions of both companies that would be beneficial to achieve prior to deal closing?
  • Will the transaction add complexity to the controllership function (e.g., more tax jurisdictions or legal entities, multiple charts of accounts, new supply chains) that will require new technologies or systems to manage?
  • Is this transaction part of a series of transactions that might trigger additional or more urgent transformation needs?

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.

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