1. Last year, the value of Merger and
Acquisition (M&A) transactions
reached a record high with aggre-
gate deals in excess of $4.8 trillion.
This exceeded the previous high in
2007 which surpassed $4.1 trillion.
While this record pace may not
continue into the future, the demand
is expected to persist. This is largely
due to historically low interest rates,
availability of capital, corporate
balance sheets flushed with cash,
and the continued pressure of many
companies to increase revenues and
profits (and increase shareholder
value).
Is now the time for you to
capitalize on this opportunity?
If the answer is yes, or maybe, you
need to make sure you are prepared.
This preparation includes a detailed
plan of action. As a business owner
or entrepreneur, surround yourself
with the right team of professionals.
This includes, at a minimum, a very
qualified attorney or law firm,
accounting firm and investment
banker. While each M&A transac-
tion is unique, there are some key
similarities and the right team of
experts can help you avoid many
painful and often times, expensive
mistakes. The key saying is “you
don’t know what you don’t know”.
Most M&A deals will focus on core
business activities or key technolo-
gies of a company. These focus
points can always be traced back to
the financial statements of the
business. Are your financial
statements in compliance with Gener-
ally Accepted Accounting Principles
(GAAP)? Have they been audited or
reviewed by an independent CPA
firm? If you are serious about a
future transaction, it is imperative to
address your company’s financial
statements now. The time involved to
ensure GAAP compliant financial
statements or to complete an audit
can be lengthy, and you could be
missing out on the “perfect” opportu-
nity. Planning and forward thinking
is the key, as you never know when a
company could be knocking on your
door to make an offer.
Involve your team early and often.
The legal side of an M&A transaction
involves deal structuring, with such
considerations as:
•Will the transaction be a stock sale
or an asset sale?
•All cash transaction, or part cash,
part stock or even a seller note?
•Will it be structured as an install-
ment sale?
•Will it have earn-outs?
•Are future employment agreements
needed?
•Will there be a covenant not to
compete?
•What are the tax ramifications, etc.?
While many M&A transactions seem
to make sense at the beginning, there
are countless examples of failed M&A
deals, many of which can be traced
to poor planning. And, while good
planning is critical, it is not always a
fail-safe. Execution of the plan to
ultimately close the transaction is
another key component. The details
of an execution plan can be a topic
for a later date.
If you are considering a potential
merger or acquisition, or sale of your
business, you should contact your
accountancy firm or legal firm for
assistance.
Gordon S. MacLean, CPA
Gordon is a Partner and the Director
of Audit Services at RJI. He has 30
years of experience, including 20
years at a Big 4 firm. He has been
involved in numerous merger and
acquisition transactions (both
buy-side and sell-side transactions),
and assisted various companies with
their related due diligence and
accounting assistance in anticipation
of a sale or M&A transaction.
RJI
Established in 1980, RJI specializes
in audit, accounting, corporate and
international tax issues for publicly
traded and privately held companies.
RJI is PCAOB registered and the
Southern California member firm of
DFK International, a top 10 interna-
tional association of independent
accounting firms and business
advisers.
RJI CPAs paid for this space and
is solely responsible for its content.
CAPITALIZE ON THE HOT M&A MARKET?
GordonS.MacLean,
CPA
Gordon can be reached at
(949) 852-1600 or emailed at
gmaclean@rjicpas.com