Mergers And Acquisition Support And Due Diligence
The purchase of or merger with an existing business needs to be conducted with great care and due diligence on both sides of the transaction. Expertise is required in both legal and financial matters, and a detailed, thorough plan must be drafted and executed to achieve a smooth transition into a new, more valuable and profitable organization.
At our firm, we can provide you with the financial and accounting experience you need to successfully complete a merger or acquisition. We have experience on both sides of the transaction – from the seller’s perspective as well as the buyer’s – and we will bring this perspective to your acquisition process. Your strategy should be to minimize both costs and risks in completing the acquisition – and we can help you to achieve both objectives.
Mergers and acquisitions should not be entered into lightly. These are substantial, all-encompassing endeavours which will change the entire organization and infrastructure of your firm, and have an impact on your livelihood, as well as that of all your employees, going forward. Customers and vendors alike will have to adjust to the changes as well, so it’s extremely important that plans to enlarge the firm through new acquisitions and mergers are well-thought-out and extremely thorough. We can help you to create a comprehensive plan to guide you through this process.
The accounting aspect of mergers and acquisitions is a tricky process, and it’s very important that the value of the acquired assets be recorded at fair market value, and that the amount paid for these assets reflects any goodwill on their value.
Closing and Post-Deal Support
Even once the acquisition is complete, the story doesn’t end there. Integrating the newly acquired business or its assets into operations is in many ways even more challenging than completing the acquisition in the first place. It’s another step where we can help you to make the changes that need to be made by monitoring operations following the merger or acquisition to find areas that need improvement or adjustment under the new circumstances your business now finds itself in.
Due diligence is, put simply, an attitude of care, consideration, and conscientiousness when valuating any transaction. Does the asking price for a potential acquisition accurately reflect the assets (and liabilities) being sold? And if you are selling, can you be sure that your financial accounting and internal controls processes are accurate, organized, and presented in an accurate and meaningful way? The advantage of the due diligence process is that these questions can be effectively answered by an experienced team of due diligence experts, which we can provide for you at reasonable and competitive prices.
The due diligence services we can provide for you include the following:
- GAAP compliance. Finances need to be reported in a manner which reflects generally accepted accounting principles in order for all parties to a sale, as well as third-party observers including potential government regulators, to be able to make a valid comparison with other firms operating in the same industry (also called an “apples to apples” comparison). Note that GAAP can be industry-specific, though many principles are expected to apply to all industries, and that accounting for tax purposes often does not adhere to GAAP, and it takes an experienced and knowledgeable accountant to present financial information according to both GAAP and tax purposes.
- Normalization of data. Generally, interested parties in any transaction want to be aware of normal operations, so exceptional or one-time assets and liabilities can be removed from the financial statement analysis, but not in a way which is fraudulent or misrepresentative of the firm’s normal operations.
- Proforma summary. The financial statements provide an important “snapshot” of a firm’s financial health and preparedness for instability or change, but it’s also important to get a look at the bigger picture. Have input or sales prices changed, or are they forecast to do so? Has the firm moved in the direction of outsourcing certain departments, or bringing contracted services in-house? Have new products been introduced, or are any in development? Have any new facilities recently been opened, or closed? Has there been a large influx of new customers or clients, or have a large number recently departed, or are expected to do so in the new future?
- Working capital review. Working capital is a term referring to current assets (cash, receivables, marketable securities, inventories, supplies) less current liabilities (vendor payables, taxes payable, salaries payable, short-term loans). This is also called operating liquidity. It’s important to know how much working capital any firm has at any given time, in order to gauge short-term flexibility for immediate changes in direction brought on by necessity or by a change in strategy that a new owner might bring.
- Deal advisory. Analysis of existing agreements the seller has with third parties which will be acquired by the buyer, including purchase agreements, contracts, and debts.
Awerix CPA Professional Corporation. All Rights Reserved