After a merger or acquisition (M&A) event, a smaller acquiring company could become global overnight. The process of consolidating and aligning different systems, languages, currencies and leadership structures is never entirely painless. One of the most impacted departments is the office of finance. To help you find a resolution to this transition struggle, we have identified four steps that will help you control and streamline your Record to Report (R2R) process after a global M&A event.
“According to a Wall Street Journal survey, more than 70% of executives said merger and acquisition deals were on the rise.”
While M&A events are generally instigated for cost and efficiency savings, often the process itself can have the opposite effect. And similar to a disaster recovery event, the sooner business continuity is restored, the less impact the event will have on the bottom line. In order to avoid any unnecessary delays and complications, the acquiring company must have a thorough diligence checklist prepared.
Using the checklist gives the acquiring company a starting point to obtain a clear view of the history within their new organization, and consequently enables the office of finance to complete the R2R process with the correct steps in the correct order with the proper people involved.
Additionally, retaining business history is incredibly important as losing experience and talent comes with a cost. The proper technology helps ensure business continuity by preserving your history of data, documentation and processes. Therefore, to ensure the diligence process is not only accurate but efficient, the acquiring company should build in an automated solution to give the highest visibility into their new company.
When a domestic-only organization completes an M&A deal with a worldwide company, it must quickly integrate and standardize a variety of multinational financial processes. Departments and business units must also be able to communicate accurate information in a timely manner. Creating, supporting and selling products and services across international borders is a lucrative but complicated process. In order to rise to that challenge, organizations must standardize their R2R process using technology supporting their finance and accounting (F&A) teams down in the trenches.
Beyond the general R2R process, global operations frequently encounter bottlenecks when managing transactions between two entities that are now folded within one company. Due to manual processes, disparate third-party systems, multiple currencies, and country-specific regulations and tax policies, performing effective and efficient intercompany accounting continues to be a leading challenge for F&A departments across the world. Enhanced preventative controls support non-trade transactions and automated detective controls cover the rest. Any discrepancies between ledgers are quickly discovered and reconciled accurately, ensuring the R2R process is completed seamlessly.
Additionally, once entities are merged, often multiple shared service centers (SSC) now exist under one company umbrella. To consolidate those processes and information, the SSC’s operating procedures must be updated during the M&A transition to retain the newly created value from shared resources. Fortunately, automation of the R2R process has consistently shown the ability to help companies rediscover the same growth that inspired them to move toward an SSC in the first place.
As mentioned previously, ensuring business continuity is the first step toward earning the cost savings that originally drove the M&A event to occur. When bridging the gaps between two previously disparate entities, the acquiring company must be able to access all of their existing and acquired data while completing the R2R process. Generally, the new organization will now contain multiple ERP instances that must now all work together. And, if the office of finance is to establish business continuity, it can ease the transition struggle by utilizing an automated solution with agnostic ERP connection capabilities that can adapt to any system that has been put in place.
While the M&A negotiations drag on, financial reporting must continue as always. In fact, SEC scrutiny is known to increase concerning merging entities. Instead of just reporting for one organization in one country, the office of finance is now responsible for a global organization with multiple currencies, locations and languages.
Furthermore, the CFO and CEO are required to sign off on the control structure of the company they just bought. Do they have confidence in their controls? Trintech’s automation capabilities align compliance phases and accurate documentation to ensure critical controls flag issues as soon as they arise and before they derail the entire R2R process.
Even when all parties enter an M&A deal with the best of intentions, complications invariably ensue. When one company acquires another one in a different market or industry, they must quickly gain visibility into and control over the various processes and systems utilized by the acquired organization. When the office of finance and its processes are set up for success with an automated solution the team is empowered to support a global R2R process. It is only then that you can truly gain the cost and efficiency savings that M&A events are designed to provide, while also reducing the risk inherent in a new acquisition.
Newly global organizations are typically spread thin with little time to spare and automation can support the office of finance’s multifaceted requirements during an M&A event. Learn more about Cadency by Trintech, our comprehensive system of controls for the entire R2R process, check out our solution.
 Dettmar, S., Garay, M., Thomson, R. (March 12, 2018). Technology Acquisition, Increased Cash to Drive M&A Growth in 2018. Retrieved March 16, 2019, The Wall Street Journal.