Successful mergers need management accountants

The uncertain economic outlook means businesses are scrutinising their futures. Leadership teams find themselves wondering: How do we survive? Better yet, how do we thrive? How do we navigate the volatile headwinds? 

An answer that can reveal itself: Merge with another company. 

When a potential merger is a topic of discussion, management accountants will be crucial to assist as trusted advisors. 

Achieving a successful merger comes with challenges. As a management accountant, with your data-centric mindset, and your thorough understanding of the importance of targets and returns on investment, your insight will be key.

Analytical minds are necessary to review data and reports when leaders strive to answer questions such as:

• How will each party benefit from the merger? 
• What respective strengths does each company bring to the table? 

If it is done well, there’s much to gain from a successful merger. So what should you look for if you are asked to advise on such a move?

Evaluate the potential benefits of a merger for both businesses. 

If you are considering the merits of a merger, the first thing to look for is potential synergies between the two entities.

Perhaps your company has strong marketing and distribution capabilities. It may have senior managers who are good at spotting opportunities and promoting products. What it needs are research capabilities. There is obviously potential to merge with an entity which has an extensive research function with a track record of high quality research and development. 

But before recommending the merger takes place, you should properly examine those R&D credentials. Has the other company developed any new products recently, or is it trading on past glories? 

Assuming that your due diligence finds that both entities do have the capabilities they claim to, let’s explore the potential benefits and risks of a merger.

Benefits:

• Extending the reach of the two organisations. This could mean access to new markets and commercial relationships. 
• Greater revenue for investment. The merged company could spend more on research or marketing, for example. This investment could further increase market share. 
• Expanded historical knowledge. Tapping into what other companies have learned over the years is sometimes an under-rated benefit of a merger.

Risks:

• Staff departures. A significant risk in a merger is losing people with expertise. Some staff might not want to stay — especially if they think their job is at risk. 
• Incompatible business models could lead to process disruption. Merging organisations could disrupt their processes which could affect market confidence. 
• Reputational damage. Sales could plummet if consumers are concerned that the product quality will be diluted by merging with a presumed inferior company. What might be considered a merger of equals by one side could be viewed as a takeover by the other. 

Management accountants know operations, management, and strategy.

As you can see, if your company is considering a merger, your expertise will be welcomed. 

As long as you apply the principles of due diligence you will be able to oversee a good strategic decision-making process. 

Given the burgeoning trend in data analytics, the task of analysing the best acquisition and divestiture opportunities now falls predominantly in the hands of management accountants. In a hyper-globalised world where mergers and acquisitions are commonplace, a reliance on their skills will only continue to grow.

With your insight, you can play a pivotal role in a company’s domestic and international development, and spearhead a new chapter in your company’s corporate history.

Start your management accounting journey today

If you’re not yet a management accountant but want to become one, explore the CGMA® designation. If you are a chartered account and would like to expand your knowledge, there are professional development resources with CIMA®.

Successful mergers are born from mutual trust and business insights — management accountants can promote both.