By Rob Starr, Content Manager, Big4.com
According to a new report by Ernst & Young, Aligned for growth – Reporting on post-deal success, companies undergoing acquisitions need to provide the right financial information as early as possible to their acquirer during the M&A process to avoid problems occurring with integrating finance and accounting integration.
The report surveyed 200 senior finance and accounting executives from 21 countries across Europe whose organizations have completed an M&A transaction in the last three years, and looks at the approaches taken to integrate finance, accounting and reporting functions.
Andy Smyth, Ernst & Young LLP Financial Accounting Advisory Services (FAAS) Partner, says:
“As year-end reporting deadlines approach, companies are under pressure to be fully transparent with stakeholders. The implications of inaccurate reporting immediately following the transaction are potentially very severe, including a loss of management credibility and, in some circumstances, a restatement in a future period. Finance functions’ access to robust information at the right time — both pre-deal and post-deal — reduces the risk of inaccurate reporting and allows management to communicate the financial impacts of an acquisition transaction to a company’s stakeholders with confidence.”
Clear and open communication between the acquirer and target, prior to and throughout all key stages of the transaction, was a priority among respondents in order to achieve effective 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, and would better leverage existing management information and due diligence to improve their understanding of the target’s reporting processes.
The survey showed that the timing of planning for post-deal accounting and finance integration has a significant impact on the success or otherwise of the integration program. Of respondents who had issues with management reporting, 77% experienced an inability of the target to produce timely management reporting. Over a third (39%) of respondents began planning only at or after deal completion.