Mergers and acquisitions (M&As) take place every day in the business world.

Whether the goal is to acquire new talent or expand their market reach to increase revenue, Companies large and small can benefit from these strategic transactions—provided they are carried out with thoughtful planning and the expertise necessary to ensure a smooth transition.

A strong team of experienced advisors is the key to success. This is true for both private and publicly traded enterprises. Forensic accountants in particular play a critical role in ensuring a successful merger or acquisition and are often called upon to analyze and provide feedback on financial information.

Before we dive into the specifics and where (and when) forensic accountants fit into the process, let us take a moment to define each strategy.

What are mergers and acquisitions?

Like the name implies, a merger occurs when two or more companies combine or merge to become a single entity. When this happens, the original companies cease to exist and a new enterprise is formed.

In contrast, an acquisition takes place when one (typically larger) company acquires another company and assumes control of all operations. The acquired company then becomes a part of the larger entity.

What are the benefits of mergers and acquisitions?

The driving force behind mergers and acquisitions is growth.

By joining forces with or by purchasing other companies—either within the same industry or in complementary industries—businesses can achieve the following benefits:

Increased efficiency (leading to decreased costs)
Additional revenue streams (risk diversification)
Expanded product and service offerings
Access to new talent and technology
Gain an edge over competitors
Increased brand awareness

Because of the complexities involved, there are several things to consider before entering into a merger or acquisition. Both strategies involve a significant economic investment, which is why it is important to have a clear understanding of the financial health of all companies involved. Working with a skilled forensic accountant is the first step toward ensuring financial accuracy and transparency throughout the process.

How do forensic accountants ensure success?

Having an experienced CPA on your team is the key to minimizing risk and maximizing profitability during the merger and acquisition process. In the planning and preparation stage, as well as after the transition is complete, their expertise and guidance can help you avoid potential pitfalls and ensure your new business is set up for success.

Assist with due diligence

During due diligence, your legal team will conduct a thorough assessment of the target company. This includes a deep dive into its accounting records to gain insight into financial performance and projected revenue. Adding a forensic accountant to your team can take it an important step further, helping to identify potential red flags (such as hidden debts or fraudulent activity) that may negatively affect the transition.

Deliver an accurate business valuation

Determining the true value of the business entities involved in the transaction is a critical component of the M&A process. A business valuation must be performed by a qualified and credentialed valuation expert in compliance with the standards set forth by the American Institute of Certified Public Accountants (AICPA). Because the valuation process is complex and extensive, you should think about partnering with a qualified accounting firm well ahead of your projected merger or acquisition date.

Provide negotiation and post-transition support

Once due diligence has been conducted and an accurate business valuation provided, your legal team will draft the merger or acquisition agreement to move the process toward completion. Qualified CPAs with M&A experience provide valuable assistance at this stage, helping to negotiate a fair price based on their expert analysis and calculations. After the merger or acquisition is complete, accountants may assist with financial integration, post-deal audits, and ensuring tax compliance.

Successfully navigate M&As with the right partner.

Mangold Anker Phillips, now Aprio, has helped many clients successfully navigate complex mergers and acquisitions. We understand that every business is different, and our highly skilled team has the expertise necessary to guide you through each step of the process—from evaluating company financial health to planning for the income tax implications.

Call (512) 327-0909 for a free 30-minute consultation or email us at info@map-cpas.com to learn more.