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M&A Fundamentals – Basic Accounting Knowledge for M&A Transactions

This group of article provides some introductory information for executives from non-financial backgrounds who need to build a basic understanding of business valuation to support mergers and acquisitions activity.   It aims to provide a basic understanding of the accounting information and financial concepts that underpin mergers and acquisitions activity.

The material assumes no more than a rudimentary understanding of accounting and corporate finance.  If you have an accounting qualification, business degree or MBA you will probably be familiar with all the concepts presented.  Nevertheless, you might find useful the slightly different M&A spin on basic financial concepts. Readers without any financial background will find familiarising themselves with this material will help them better understand the financial information used for M&A business valuation.

The contents of these article represent the minimum financial pre-knowledge we would expect from a student attending our Advanced Business Valuation training course.

 

M&A Business Growth Strategy

Components of Accounts

The published accounts of a joint stock company consist of three main components:

BALANCE SHEET

The balance sheet shows the net worth of the company at the date of preparation.

INCOME STATEMENT (profit and loss account)

Shows revenues, costs and income of the company for an accounting year or sometimes a shorter accounting period.

CASH FLOW STATEMENT

Shows the cash generated by the company, and how cash is used, for an accounting year or sometimes a shorter accounting period.

By clicking on the name of each of these three components of published accounts you will be taken to an article that explains the key elements of each component.  Issues that might arise in an M&A transaction are highlighted for each element.

The presentation of the accounts, and the detail of preparation, can vary somewhat between jurisdictions (for example International Accounting Standards, US GAAP) but there is little fundamental difference that will impact an M&A transaction.

To eliminate any possible issues most acquirers will restate financials to their own standards as part of the mergers and acquisitions process.  Many proprietary information sources restate accounts to US GAAP to help with M&A comparisons between jurisdictions.

 

 

About The Merger Training Institute

We provide practical, in-career mergers and acquisitions training for boards, executives and professionals in global corporations.

Our short, intense M&A courses are designed for executives needing to understand best M&A practice or adding new M&A responsibilities to their existing roles.

The courses are taught by tutors with hands-on M&A experience gained as part of corporate management teams. As well as being academically rigorous they are rich with case studies and real-world examples based on our tutor’s practical mergers and acquisitions experience.

Our course participants come from a wide range of industries and roles including general management, business development, strategy, marketing, finance, human resources, operations and legal.

 

Our Mergers and Acquisitions Training Courses

Core Mergers and Acquisitions Skills Training Course

The Core Mergers and Acquisitions Skills programme (M&A training course) is a three- day programme that teaches all the commercial and technical skills you will need to confidently lead or support a successful M&A transaction.

Our expert tutors guide you through the M&A process from strategy and deal origination to valuation, due diligence, deal structuring, contract negotiation and post-merger integration.

M&A Due Diligence Training Course

The M&A Due Diligence Training Course is a two-day programme that offering a solid grounding in the techniques used by some of the world’s most successful companies to assess risks, evaluate synergies and confirm the strategic fit of an M&A target. The course is designed specifically for executives involved in corporate M&A.

Successful Post-Merger Integration Training Course

The Successful Post-Merger Integration Training Course is a two-day programme that provides a solid grounding in the post-merger integration techniques used by some of the world’s most successful companies to deliver value from their M&A transactions.

Across the two days of the course you move from the key decisions made in the pre-deal phase, through the critical first 100 days and on to full synergy delivery. The course covers the post-merger integration issues most likely to arise in each business function and the most important business processes.

Advanced Business Valuation Training Course

The Advanced Business Valuation training course is a two-day expert level business valuation training course that teaches participants how to prepare robust business valuations in the context of a corporate M&A transaction.

Our expert tutors move you past the stage of plugging numbers into a standard spreadsheet and help you explore how risk, synergies and the quality of the target company might impact its value.


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The 10 Things You Need to Get Right For Post-Merger Integration Success

Read about it here
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M&A Fundamentals – Calculating the Cost of Debt for the WACC Formula

Read about it here
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M&A Fundamentals – Using the Capital Asset Pricing Model to Calculate Cost of Equity

Read about it here