5 Creative Uses of Financial Tools in the M&A Process

KeenVision Admin

Mergers & Acquisition activities have increased substantially over the last couple of years – we are working with clients across all industry groups that have been very active with M&A. More and more, we are advising clients to view M&A as a recurring activity as opposed to an occasional disruption.

Financial management tools (Planning, Reporting, Close Management, and Analytics) have tremendous capabilities to ease the impact of M&A activity on proactive Finance and Accounting teams.

Here are 5 fantastic ways to leverage technology and smooth out the impact of M&A activities.

# 1:  Generate Efficient What-If Assessments of Potential M&A Outcomes

Business planning and modeling technologies like Planful can be utilized to scenario plan in advance of an acquisition. Iterative scenarios generated based on key drivers and/or business integration strategies can reveal an array of potential outcomes. Using the same planning solution for acquisitions that you leverage for planning the base business is powerful, effective, and highly efficient.

If you are desiring an advanced model for analyzing the potential revenue impact of the merged entities, incorporate a business modeling engine (like Planful’s Dynamic Planning) to assess the growth in complementary product lines, channel expansion, or even cohort-based revenue streams.

# 2:  Quickly Assess Balance Sheet Risk

How do you gain a quick view of the acquired Balance Sheet? In our experience, the fastest way to gain insight into the details of the acquired Balance Sheet is with the FloQast Close Management application.

Designed for ongoing Close Management processes, the FloQast Account Rec process can provide a detailed assessment of potential risk items in the acquired Balance Sheet so they can be addressed and included in Earn Outs and/or clawbacks if applicable.  This platform can be implemented within the first month of the acquisition integration.

Similar to the Accounting Consolidation process in Planful, FloQast’s process can be initiated using the acquired companies existing Chart of Accounts. No reason to wait for an ERP and GL implementation to get a view into the Balance Sheet.

# 3:  Centralize Acquisition Processes in the Consolidated Close

The Planful Consolidation process efficiently allows the Accounting team to expand to accommodate new entities. The primary task is the definition of a Chart of Accounts mapping from the acquired GL to the existing company Accounts.

Beyond simple consolidation, many of our clients are extending their Consolidation applications to effectively manage acquisition-related items:  Purchase Accounting, Earn-outs and Adjusted EBITDA calculations. Tools like Planful Consolidations allow for these processes to be defined and implemented by the Accounting team – without complicated scripts or code changes.

# 4:  Utilize Proforma Data for Reporting and Performance Measurement

Proforma reporting provides management teams with the ability to assess operational performance beyond GAAP-based financials. CPM applications allow users to define Scenarios that house “proforma” data separate from the GAAP actuals reporting data. These data sets allow the Finance organization to deliver truer year-over-year performance reporting views and analysis of the individual and combined businesses.

Proforma data sets can also include operational metrics and measures data – key performance indicators that both organizations are used to reviewing as part of their routine business management.

Quite often, the same chart of account mapping defined for the Accounting Consolidation process can be utilized to blend Proforma actuals, Annual Operating Plans, and Current Forecasts together to provide the data blocks needed to drive this valuable performance reporting.

# 5:  Incorporate Initiative Planning into the Post-M&A Planning Process

We have worked with a few client companies that included an “Initiative” dimension in their financial planning process. Initiatives can be planned actions (re-structuring events, investments, expansions) or actions triggered by the achievement of a certain time or performance-based milestones. The initiative can overlay on an organization or regional dimension or be completely stand-alone in nature.

Initiative-based planning is very effective when combined with Scenario-based planning approaches with each Scenario containing a variation of the initiative. Variations can include timing differences (start or speed of change) or magnitude differences (rate of change). Drivers can be very effective in gaining efficiency in this advanced approach to business modeling.

The organizations we see managing M&A activities the best are ones who have adopted an approach of M&A being a recurring activity – with tools and defined methods to ease the burden on the Finance and Accounting teams.

Strong technical platforms, like Planful and FloQast, in the hands of strong planning teams become powerful business management assets that take the strain and pain of the M&A action away from the Finance organization.


Mark Davidson

Managing Partner


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