Business combinations typically signal a promising new era, but they also come with a complex set of business intricacies to sort out. Not only are there numerous procedural and compliance hoops to jump through to form a new enterprise, but there are significant risks in not getting the fundamental aspects of the combination right, from the initial purchase price accounting to establishing a new accounting and finance infrastructure for the combined entity and migrating systems.
Companies often don’t have the internal resources with the expertise or bandwidth needed to tackle the complex offshoot of activities that accompany business combinations. That’s where we can help, as we have deep expertise in this area.
A case in point
Leading a system implementation
We worked with a newly merged bioscience/pharma company acquired by a venture capital firm to get the new entity off to a solid start from an accounting, financial and system implementation perspective. The combined company had a small accounting and finance team that was overwhelmed with day-to-day responsibilities and could not take on the necessary merger-related activities, which included conducting two audits and transitioning to a new ERP system.
In addition to getting the project on track after being delayed six months, we were able to speed the process by using advanced Excel tools to migrate data and ensure accuracy. We successfully onboarded the client to the new system within two months. Other changes we implemented as part of the transition included:
Interim accounting and financial support
Soon after we began working on the system implementation project, the company’s chief financial officer left abruptly for health reasons. His departure was followed by additional turnover, with nearly the entire finance team also leaving. SolomonEdwards stepped in to form an interim accounting and finance department, filling six roles in total including that of interim CFO, senior accountant, finance manager and accounts payable/accounts receivable staff. We also served in an advisory role to the CEO and private equity partner.
Among the critical activities the short-staffed team had not completed were two audits, including the overdue first-year audit of the combined company that was required by the PE firm and lenders. We began the process of performing the overdue audit, overcoming numerous challenges along the way. One of the first problems we discovered was that the purchase accounting had not been done correctly, which led to an inaccurate opening balance sheet. We brought in our technical advisor with expertise in purchase price accounting to resolve these issues and finalize opening balances with the auditors.
Although we were hindered by having to retrieve data from the company’s two separate systems and the lack of documentation and insight into prior procedures due to turnover, we were able to research, gather and verify the information needed for the audit. We worked closely with the outside auditors to ensure they received everything required and brainstormed on how to achieve compliance where information was limited.
Laying the foundation for an improved audit
We produced audited financial statements within four months of beginning the audit portion of the engagement, completing an audit that had taken over a year to perform due to short staffing and multiple starts and stops. Moreover, we introduced improvements that led to a streamlined second-year audit that we also performed for the client. Where the initial audit had taken over a year to complete, the second-year audit took only two months.
Finally, we took an active role in the hiring process for a new controller and finance manager, helping to ensure the selection of candidates who had the hard and soft skills needed to excel in the company’s environment.
Short-term expertise or long-term support
By providing a team of professionals with the specialized knowledge and bandwidth needed, we were able to stabilize a chaotic internal environment and complete critical merger-related activities. We helped the client resolve initial purchase accounting problems, transition to a new ERP system, establish new accounting and finance processes to support the system adoption, and complete two complex audits that had stalled—activities that provided an operating template for the company, positioning them to execute effectively going forward.
Whether you need specialized skills to integrate a new company or longer-term operational support when the unexpected occurs, we can provide the people and expertise you need to resolve complex situations.
Learn more about our Accounting and Finance Operations Support services.
