{"id":5360,"date":"2021-03-11T16:47:58","date_gmt":"2021-03-11T21:47:58","guid":{"rendered":"http:\/\/localhost\/osborne\/?p=5360"},"modified":"2021-12-22T17:43:09","modified_gmt":"2021-12-22T22:43:09","slug":"accountants-prescription-for-success","status":"publish","type":"post","link":"https:\/\/www.osborne-group.com\/fr\/accountants-prescription-for-success\/","title":{"rendered":"Mergers &#038; Acquisitions \u2013 An Accountant\u2019s Prescription for Success"},"content":{"rendered":"<p>[et_pb_section fb_built=&#8221;1&#8243; admin_label=&#8221;section&#8221; _builder_version=&#8221;3.22&#8243;][et_pb_row admin_label=&#8221;row&#8221; _builder_version=&#8221;4.4.3&#8243; background_size=&#8221;initial&#8221; background_position=&#8221;top_left&#8221; background_repeat=&#8221;repeat&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;3.25&#8243; custom_padding=&#8221;|||&#8221; custom_padding__hover=&#8221;|||&#8221;][et_pb_text _builder_version=&#8221;4.9.0&#8243; hover_enabled=&#8221;0&#8243; sticky_enabled=&#8221;0&#8243;]<\/p>\n<p><span data-contrast=\"auto\">Back\u00a0<\/span><span data-contrast=\"auto\">in the<\/span><span data-contrast=\"auto\">\u00a0earl<\/span><span data-contrast=\"auto\">y<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">2000s, the Wall<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">Street Journal stated\u00a0<\/span><span data-contrast=\"auto\">that only 10% of acquisitions achieved\u00a0<\/span><span data-contrast=\"auto\">the<\/span><span data-contrast=\"auto\">ir<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">pre-acquisition<\/span><span data-contrast=\"auto\">\u00a0financial projections.\u00a0<\/span><span data-contrast=\"auto\">That<\/span><span data-contrast=\"auto\">\u00a0means that n<\/span><span data-contrast=\"auto\">inety percent of companies\u00a0<\/span><span data-contrast=\"auto\">will <\/span><span data-contrast=\"auto\">experience a\u00a0<\/span><span data-contrast=\"auto\">financial\u00a0<\/span><span data-contrast=\"auto\">strain on their\u00a0<\/span><span data-contrast=\"auto\">core\u00a0<\/span><span data-contrast=\"auto\">business<\/span><span data-contrast=\"auto\">, at least in the short term<\/span><span data-contrast=\"auto\">.<\/span><span data-contrast=\"auto\"> If the acquirer is <\/span><span data-contrast=\"auto\">to survive<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">or even thrive<\/span><span data-contrast=\"auto\">,\u00a0<\/span><span data-contrast=\"auto\">they\u00a0<\/span><span data-contrast=\"auto\">need to stay in control of\u00a0<\/span><span data-contrast=\"auto\">the\u00a0<\/span><span data-contrast=\"auto\">business<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">and ahead of any pitfalls<\/span><span data-contrast=\"auto\">.<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">So<\/span><span data-contrast=\"auto\">,<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">why could<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">a company\u00a0<\/span><span data-contrast=\"auto\">be at risk of<\/span><span data-contrast=\"auto\">\u00a0lo<\/span><span data-contrast=\"auto\">sing<\/span><span data-contrast=\"auto\">\u00a0financial control<\/span><span data-contrast=\"auto\"> post-acquisition<\/span><span data-contrast=\"auto\">?<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">First<\/span><span data-contrast=\"auto\">,\u00a0<\/span><span data-contrast=\"auto\">if\u00a0<\/span><span data-contrast=\"auto\">the company<\/span><span data-contrast=\"auto\">\u00a0borrowed<\/span><span data-contrast=\"auto\">\u00a0funds<\/span><span data-contrast=\"auto\">\u00a0to pay for the acquisition<\/span><span data-contrast=\"auto\">,\u00a0<\/span><span data-contrast=\"auto\">their<\/span><span data-contrast=\"auto\">\u00a0borrowing\u00a0capacity\u00a0<\/span><span data-contrast=\"auto\">that may be\u00a0required\u00a0to pay for expenses during its ordinary course of business<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">may\u00a0<\/span><span data-contrast=\"auto\">now be<\/span><span data-contrast=\"auto\">\u00a0limited<\/span><span data-contrast=\"auto\">.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Secondly, if the acquiree\u00a0<\/span><span data-contrast=\"auto\">does\u00a0<\/span><span data-contrast=\"auto\">not generat<\/span><span data-contrast=\"auto\">e<\/span><span data-contrast=\"auto\">\u00a0profits\u00a0<\/span><span data-contrast=\"auto\">as\u00a0<\/span><span data-contrast=\"auto\">they\u00a0<\/span><span data-contrast=\"auto\">expected to post-<\/span><span data-contrast=\"auto\">acquisition<\/span><span data-contrast=\"auto\">,\u00a0<\/span><span data-contrast=\"auto\">they\u00a0<\/span><span data-contrast=\"auto\">will<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">rely on<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">working capital generated by other divisions<\/span><span data-contrast=\"auto\">.\u00a0<\/span><span data-contrast=\"auto\">In this case,<\/span><span data-contrast=\"auto\">\u00a0the strain on cash flow\u00a0<\/span><span data-contrast=\"auto\">creates\u00a0<\/span><span data-contrast=\"auto\">added pressure on the\u00a0<\/span><span data-contrast=\"auto\">core\u00a0<\/span><span data-contrast=\"auto\">business<\/span><span data-contrast=\"auto\">\u00a0to<\/span><span data-contrast=\"auto\">\u00a0generate profits t<\/span><span data-contrast=\"auto\">hat<\/span><span data-contrast=\"auto\">\u00a0compensate for the shortfall of profits<\/span><span data-contrast=\"auto\">\u00a0(or losses)<\/span><span data-contrast=\"auto\">\u00a0from the acquisition.<\/span><span data-contrast=\"auto\">\u00a0The margin for risk\u00a0<\/span><span data-contrast=\"auto\">is<\/span><span data-contrast=\"auto\">\u00a0now<\/span><span data-contrast=\"auto\">\u00a0slim<\/span><span data-contrast=\"auto\">.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Here are\u00a0<\/span><span data-contrast=\"auto\">some\u00a0<\/span><span data-contrast=\"auto\">solution<\/span><span data-contrast=\"auto\">s<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">for avo<\/span><span data-contrast=\"auto\">iding these pitfalls<\/span><span data-contrast=\"auto\">:<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">For starters<\/span><span data-contrast=\"auto\">,<\/span><span data-contrast=\"auto\">\u00a0<\/span><b><span data-contrast=\"auto\">identify<\/span><\/b><span data-contrast=\"auto\">\u00a0<\/span><b><span data-contrast=\"auto\">critical stages and manage through them<\/span><\/b><span data-contrast=\"auto\">. For example<\/span><span data-contrast=\"auto\">,<\/span><span data-contrast=\"auto\">\u00a0a<\/span><span data-contrast=\"auto\">t the time of acquisition<\/span><span data-contrast=\"auto\">,<\/span><span data-contrast=\"auto\">\u00a0there is a lot of \u2018spending\u2019<\/span><span data-contrast=\"auto\">\u00a0that\u00a0<\/span><span data-contrast=\"auto\">includes<\/span><span data-contrast=\"auto\">\u00a0acquisition and transition costs such as legal,\u00a0<\/span><span data-contrast=\"auto\">IT<\/span><span data-contrast=\"auto\">,\u00a0<\/span><span data-contrast=\"auto\">and restructuring\u00a0<\/span><span data-contrast=\"auto\">costs for<\/span><span data-contrast=\"auto\">\u00a0severances<\/span><span data-contrast=\"auto\">, etc.<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">For accounting purposes<\/span><span data-contrast=\"auto\">,<\/span><span data-contrast=\"auto\">\u00a0t<\/span><span data-contrast=\"auto\">hese costs are capitalized and amortized as goodwill over a 20<\/span><span data-contrast=\"auto\">&#8211;<\/span><span data-contrast=\"auto\">year\u00a0<\/span><span data-contrast=\"auto\">period.<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">Therefore, p<\/span><span data-contrast=\"auto\">articularly at this stage,<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">it is<\/span><span data-contrast=\"auto\">\u00a0important for the company to pay attention to cashflows<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">and not be\u00a0<\/span><span data-contrast=\"auto\">misguided<\/span><span data-contrast=\"auto\">\u00a0by what is being presented in the Income Statement.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Secondly,\u00a0<\/span><span data-contrast=\"auto\">it is<\/span><span data-contrast=\"auto\">\u00a0important to\u00a0<\/span><b><span data-contrast=\"auto\">monitor<\/span><\/b><b><span data-contrast=\"auto\">\u00a0and review segmented\u00a0<\/span><\/b><b><span data-contrast=\"auto\">data<\/span><\/b><span data-contrast=\"auto\">.\u00a0<\/span><span data-contrast=\"auto\">B<\/span><span data-contrast=\"auto\">y separating<\/span><span data-contrast=\"auto\">\u00a0the<\/span><span data-contrast=\"auto\">\u00a0core<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">business from the\u00a0<\/span><span data-contrast=\"auto\">acquisition<\/span><span data-contrast=\"auto\">, financial statements can be reviewed for trends in profit or los<\/span><span data-contrast=\"auto\">s\u00a0<\/span><span data-contrast=\"auto\">that will help\u00a0<\/span><span data-contrast=\"auto\">senior management<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">monitor<\/span><span data-contrast=\"auto\">\u00a0the effect<\/span><span data-contrast=\"auto\">\u00a0of<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">the\u00a0<\/span><span data-contrast=\"auto\">merger<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">on other segments<\/span><span data-contrast=\"auto\">,\u00a0<\/span><span data-contrast=\"auto\">be\u00a0<\/span><span data-contrast=\"auto\">it\u00a0<\/span><span data-contrast=\"auto\">positive,\u00a0<\/span><span data-contrast=\"auto\">negative,<\/span><span data-contrast=\"auto\">\u00a0or neutral.<\/span><span data-contrast=\"auto\">\u00a0At\u00a0<\/span><span data-contrast=\"auto\">a\u00a0<\/span><span data-contrast=\"auto\">minimum, the company will want to ensure\u00a0<\/span><span data-contrast=\"auto\">that the acquisition has not been a distraction\u00a0<\/span><span data-contrast=\"auto\">from<\/span><span data-contrast=\"auto\">\u00a0the operation of the core business.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Finally,\u00a0<\/span><span data-contrast=\"auto\">the adverse effects of an underperforming acquisition can have\u00a0<\/span><b><span data-contrast=\"auto\">negative intangible effects<\/span><\/b><span data-contrast=\"auto\">\u00a0such as\u00a0<\/span><span data-contrast=\"auto\">damaging\u00a0<\/span><span data-contrast=\"auto\">publicity due to layoffs<\/span><span data-contrast=\"auto\">\u00a0or demoralization of the other divisions due to the cash drain needed to support the acquisition.<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">To minimize th<\/span><span data-contrast=\"auto\">ese negative effects,<\/span><span data-contrast=\"auto\">\u00a0the organization may consider\u00a0<\/span><span data-contrast=\"auto\">providing<\/span><span data-contrast=\"auto\">\u00a0bonuses to divisions that have met their targets even though the company\u00a0<\/span><span data-contrast=\"auto\">itself may<\/span><span data-contrast=\"auto\">\u00a0not have met\u00a0<\/span><span data-contrast=\"auto\">theirs<\/span><span data-contrast=\"auto\">. Also, t<\/span><span data-contrast=\"auto\">he organization will need to communicate and reinforce the\u00a0<\/span><span data-contrast=\"auto\">long-term<\/span><span data-contrast=\"auto\">\u00a0benefits of the merger and<\/span><span data-contrast=\"auto\">\u00a0will keep people informed about\u00a0<\/span><span data-contrast=\"auto\">when the<\/span><span data-contrast=\"auto\">\u00a0situation is expected to\u00a0<\/span><span data-contrast=\"auto\">turnaround.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Having had experience with acquisitions\u00a0<\/span><span data-contrast=\"auto\">at all<\/span><span data-contrast=\"auto\">\u00a0stages\u00a0<\/span><span data-contrast=\"auto\">including\u00a0<\/span><span data-contrast=\"auto\">due diligence, closing, transition and post<\/span><span data-contrast=\"auto\">&#8211;<\/span><span data-contrast=\"auto\">merger monitoring, I can assist an<\/span><span data-contrast=\"auto\">y<\/span><span data-contrast=\"auto\">\u00a0organization in avoiding pitfalls<\/span><span data-contrast=\"auto\">\u00a0<\/span><span data-contrast=\"auto\">and\u00a0<\/span><span data-contrast=\"auto\">help them\u00a0<\/span><span data-contrast=\"auto\">gain optimal benefit from a<\/span><span data-contrast=\"auto\">\u00a0merger<\/span><span data-contrast=\"auto\">\u00a0or acquisition<\/span><span data-contrast=\"auto\">.\u00a0<\/span><span data-contrast=\"auto\">For any follow-up comments or questions,\u00a0<\/span><span data-contrast=\"auto\">I can be reached a<\/span><span data-contrast=\"auto\">t\u00a0<\/span><a href=\"mailto:nnizam@localhost\"><span data-contrast=\"none\">nnizam@localhost<\/span><\/a><span data-contrast=\"auto\">.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.4.3&#8243;][et_pb_column type=&#8221;4_4&#8243; 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