Post-Merger Integration: Financial Reporting Essentials for Enterprises
Mergers and acquisitions (M&A) can be quite the thrill – the promise of expanding to new markets, increasing revenue, and a heightened competitive edge are certainly attractive. But underneath the shiny, gilded surface lies a web of complexity – especially when it comes to the post-merger integration process.
For enterprises in particular, one of the most essential (and overlooked) aspects of post-merger integration is financial reporting. Without taking the time to develop accurate, timely, and unified financials, you run the risk of timeline delays, compliance risks, missed financial goals, operational inefficiencies – and even the potential for the entire deal to fail.
As specialists in driving post-merger integration efficiency and helping enterprises achieve their strategic deal objectives, we’ve highlighted the critical role of financial reporting during a merger and outlined key considerations to keep in mind before getting started.
Why is it so important to focus on financial reporting as part of the post-merger integration process?
Financial reporting sets the foundation for any successful post-merger integration. Imagine trying to steer a ship through the fog without a compass – that’s what managing an enterprise M&A integration can feel like when you fail to gather reliable financial data.
Taking the time to develop a solid financial reporting structure not only helps ensure compliance but also helps to foster strategic decision-making, as leadership teams need to have clean and unified financials in order to make informed choices that guide deal success.
Financial Reporting Essentials to Streamline Post-Merger Integration
- Focus on unifying the Chart of Accounts (CoA)
- Implement new processes or technology to foster timely and accurate consolidation
- Gain an understanding of regulatory compliance and post-merger reporting standards
- Focus on data integration and system compatibility
- Develop a plan to monitor post-merger cash flow and working capital management
- Align forecasts and budgets
1. Focus on unifying the Chart of Accounts (CoA)
As the entities being merged may have their own unique Chart of Account (CoA) structures, consolidated financial reporting can become quite a challenge. That’s why focusing on creating a unified CoA (and mapping out the plan for combination) is key, as it creates consistent reporting across both entities, helps to simplify consolidation and analysis, and also works to reduce errors and inconsistencies.
2. Implement new processes or technology to foster timely and accurate consolidation
During post-merger integration, enterprises are tasked with consolidating financials from multiple entities – but oftentimes, these entities have different systems and accounting standards, bringing additional complexity to the table.
To ensure success and align policies across entities, it is essential to implement consolidation tools that automate data integration and reconcile intercompany transactions on a regular basis.
3. Gain an understanding of regulatory compliance and post-merger reporting standards
As enterprise M&A transactions often span multiple jurisdictions – each with its own unique reporting standards like GAAP or IFRS – enterprises must work to identify all applicable reporting standards the newly combined entity must adhere to.
It’s also important to implement systems that can withstand reporting across multiple standards. And, of course, train finance teams on the new compliance requirements and processes to ensure they have what they need to succeed.
4. Focus on data integration and system compatibility
Integrating financial data from disparate ERPs can be challenging. For best results, conduct a data quality assessment well ahead of the post-merger integration process. This will inform which types of integrations between systems will need to be added
Plus, enterprises that successfully integrate systems within 6 months of the post-merger integration process see an average of 15 percent faster time-to-insight.
5. Develop a plan to monitor post-merger cash flow and working capital management
As the post-merger integration process can alter cash flow patterns and impact daily operations, enterprises should seek to develop a plan for monitoring liquidity closely. Additionally, standardizing invoice and payment processes and optimizing working capital through unified treasury management are important steps to consider.
6. Align forecasts and budgets
During the post-merger integration process, budgeting and forecasting grow more complex – and also more critical. Be sure to develop a plan to integrate forecasting models from both entities, reassess assumptions based on the new combined operations, and make solid use of rolling forecasts.
How M&A Consultants Help with Post-Merger Integration and Financial Reporting
From unifying charts of accounts to ensuring regulatory compliance, the post-merger integration financial reporting process is no small feat.
And it isn’t just that it’s complex — it’s time-consuming and requires a lot of up-front planning to interruptions to operations and achieve the goals of the deal. That’s where M&A consultants step in, providing expertise and tools to streamline the entire process.
Plus, bringing in project-based consultants like us can save enterprises not only time but also significant costs by limiting the need for full-time staff while expertly avoiding integration pitfalls.
How consultants help with post-merger integration financial reporting challenges:
- Harmonizing charts of accounts to ensure seamless consolidations.
- Implementing consolidation tools for faster, more accurate reporting.
- Ensuring regulatory compliance across all jurisdictions.
- Managing data integrations between disparate systems, improving forecasting models to reflect the merged entity’s operations.
- Accelerating close cycles.
Ready to streamline your post-merger integration?
DLC specializes in guiding enterprises through the maze of post-merger financial reporting, ensuring accuracy, compliance, and efficiency. Contact DLC today to see how we can help your enterprise achieve seamless financial reporting and unlock the full potential of your M&A.
