How are M&As affecting Canadian mid-market account management?
December 01, 2014

When a large enterprise buys out a mid-market competitor, it gains additional assets, personnel, insights and fiscal concerns. The operations behind those mid-sized businesses have budgets, and adding them to existing processes can complicate a corporation's practices.

For one thing, allocated capital may have to be expanded or reduced based on how much the new entity contributes to the acquiring company's profitability. Depending on new structures, it may be best for two groups to merge their bookkeeping software to achieve a holistic view of all finances. 

Canadian mid-market full of mergers, acquisitions 
The Alliance of Merger & Acquisition Advisors, in cooperation with business intelligence advisory firm Bureau van Dijk?, recently released the results of its North America M&A Report for Q3 2014, which showed that Canada's mid-market M&A activity increased 38 percent in value and 26 percent in volume. The survey identified the following factors as drivers for Canada's mid-market M&A behavior:

  • An aging Canadian population is motivating private business owners to review succession plans, which is spawning M&A opportunities.
  • Robust debt capital markets have caused average available debt levels to rise and interests rates to remain low. 
  • Public enterprise valuations have shown strength, meaning economic confidence is increasing.
  • Canada's gross domestic product growth has remained lackluster, causing many corporations to consider M&As in their expansion plans. 

The effect of M&As on accounting
First off, a merger or acquisition could result in a complete revision of an organization's existing structure, meaning the manner in which budgets are allocated and investments are made may be revised at a monumental level. PricewaterhouseCoopers identified several ways in which bookkeeping is impacted by M&As: 

  • It's important for accountants to analyze how new operations' ability to generate revenue will change after existing managerial protocols are applied. 
  • Stock compensations plans and other intricate transactions will likely encounter changes. 
  • Regular consolidation assessments will have to be made for several months after the final deal is closed. 
  • Reviews of intangibles, earn-outs and other liabilities will likely have to be scrutinized by outside professionals to ensure no oversights are slipping through the cracks. 
  • Accountants must possess the commercial, legal, tax, financial reporting valuation and regulatory wherewithal to satisfy new corporate demands. 

In addition, allowing accounting software to interact seamlessly is imperative. When two companies that previously operated separately are now running together, it's important for their financial departments to allow for complete visibility into existing budgets and investments. 

Nexus: G-WEBCD1