When buying a business, it is important to put together a team of professionals to assist in completing the M&A process. This group of experts should include an M&A intermediary, a lawyer, and an accountant. These individuals will help the buyer with the more technical aspects of the deal, and will protect them from legalities and financial mishaps.
The accountant will be able to take an in-depth look at the target company’s past financials and determine whether or not it is a worthwhile acquisition for the buyer. They will have the know-how to predict future profits based on historical financial data. The accountant should also have comprehensive tax knowledge, and therefore can help predict the tax implications of buying the business and help avoid a heavy tax hit through their specialized skills.
However, one’s personal accountant is perhaps not the best choice for assisting with an M&A deal. It is vital to employ a Certified Public Accountant with experience in mergers and acquisitions in order to receive the best results. A CPA will have a skill set that is not found in a regular bookkeeper.
The CPA should definitely have a background working with businesses, and they will be even more beneficial to the buyer if they have helped purchase businesses of the size that the buyer is pursuing in the past. Buying a small business is a much different endeavor than purchasing a multi-million dollar corporation. Since it is important that the accountant know about the type of business being bought, the buyer should first establish targets so that they know what criteria the accountant should meet. The accountant does not need to become involved until the due diligence process commences.
How would one go about finding a CPA with experience in M&A? Perhaps one of the best ways to find a credible professional is through a referral. An M&A firm should have a working relationship with at least one CPA, so that should be one’s first course of action for finding the right person for an M&A team.
It is important to interview the accountant before entering into an agreement with them. Make sure that they have credentials that stand up to what is necessary to successfully close the deal. Do not be afraid to turn someone away because they do not have enough knowledge of the M&A industry. The accountant is a vital part of the team, and the wrong one could cost the buyer millions of dollars if led on the wrong path. Finally, the accountant should be someone that gets along well with the buyer, since they will be spending a lot of time together in the upcoming months of the M&A process.
A CPA should not replace a business valuator, since these are two very different concentrations. The CPA should complete the due diligence, but a professional appraiser should be hired to do any valuations.
George & Company is an experienced M&A firm that would be happy to refer you to an accountant, as well as other professionals that can assist you in purchasing a mid-sized business. We also have professional business valuators in-house that would be happy to appraise a target business. Contact us confidentially today to learn more.