Mergers and acquisitions (M&A) involve combining two businesses into one. This consolidation of companies and assets is typically achieved through various financial transactions, such as mergers, acquisitions, tender offers, purchase of assets, and consolidation. If you are in the process of entering the mergers and acquisitions process, a Certified Public Accountant (CPA) can help ensure that the process goes smoothly. From conducting due diligence to advising your company on tax advantages, you can count on an experienced CPA to help minimize risks and maximize value during an M&A.
Business Mergers and Acquisitions
Mergers and acquisitions refer to the consolidation of companies. Specifically, the term merger refers to the joining of two companies into one entity, while acquisitions occur when one company is taken over by another company. M&A transactions are completed as two companies can often create more value together compared to operating individually. Mergers and acquisitions can take place by purchasing common shares or assets, or by exchanging shares for shares or shares for assets. When successful, a merger or acquisition can improve a company’s performance, accelerate growth, create tax advantages, and promote strategic realignment.
Some of the largest conglomerates in the world are a result of a merger or acquisition. Synergy is critical for most M&A deals. This means that the transaction must increase efficiency and revenue within a business when two companies merge together. This can be achieved in a number of ways, such as by increasing profits or cutting costs. When two companies join together, that business will be worth more and able to generate larger profits. There are several different types of mergers and acquisitions designed to cover various types of transactions. The most common types of M&A include horizontal mergers, vertical mergers, concentric mergers, conglomerate mergers, leveraged buyout, and takeovers (which may be hostile or friendly).
Role of CPA During M&A
Many businesses going through a merger or acquisition rely on Certified Public Accountants to aid them in the process. Both buyers and sellers can benefit from using a CPA. For example, buyers who use a CPA become better equipped to structure their business for tax efficiency. Buyers can also benefit from unrecorded assets, financial and tax due diligence, liabilities, valuation, and identification. They may also experience other key benefits, such as analysis of quality earnings and the evaluation of working capital and cash flow.
Sellers too can benefit from using a CPA during a M&A transaction. A pre-sale inspection of operations and a financial statement analysis can help ensure that sellers receive a satisfactory payment that is fair based on the business’s true value. Other benefits for sellers include structuring for tax efficiency, accurate entity valuation, and net worth schedules. A CPA can also respond to buyers’ questions and assist with pre-deal packaging.
Get Help from a CPA with your M&A
If you are in the midst of a merger or acquisition, consider speaking with an industry professional with experience in this type of commercial transaction. Contact Diener & Associates today to see where your business stands and how enlisting a CPA during a merger or acquisition can help drive your business forward, call 703.386.7864 or schedule a consultation online.