Why Engaging Experienced CPAs Early is Crucial in Mergers and Acquisitions

Mergers and acquisitions (M&A) are some of the most transformative events a business can undertake. Whether you're scaling for growth, entering new markets, or consolidating operations, these deals come with high stakes and intricate challenges. To navigate them successfully, engaging experienced Certified Public Accountants (CPAs) *before** entering the deal *is not just smart—it's essential. What do CPAs help you in your M&A?

Financial Due Diligence

The first step in any M&A transaction is ensuring the numbers make sense. CPAs conduct detailed financial due diligence to verify the accuracy of financial statements, uncover hidden liabilities, and identify risks that could impact the deal's value. An expert CPA doesn't just examine the books; they provide a comprehensive view of the target company's financial health.


Tax Structuring and Implications

M&A deals often have significant tax implications. Experienced CPAs help structure the transaction to minimize tax liabilities while complying with regulations. Whether the deal involves asset purchases, stock purchases, or other structures such as a 338(h)(10) deal, their expertise ensures you don't face unexpected tax burdens after closing.

Valuation Support

Determining the right price for the deal is an art and a science. CPAs provide critical insights into valuation by analyzing cash flows, revenue trends, and industry benchmarks. They help buyers avoid overpaying and ensure sellers receive fair value.

Post-Merger Integration Planning

A seamless transition is critical to unlocking the deal's value. CPAs offer foresight into potential integration challenges, such as aligning accounting practices or consolidating financial systems. Addressing these issues early paves the way for smoother post-deal operations.

Safeguarding Against Surprises

Engaging CPAs early in the process helps prevent unpleasant surprises. They identify red flags such as overstated earnings, pending litigation, or contingent liabilities—issues that can derail a deal if discovered too late.

Real-Life Experience

Recently, CM worked with a client who sold their business for $11 million. After the sale, they stayed on as an employee under the new ownership. However, the purchasing entity decided to shift strategies and offered to sell the business back to my client for $8 million. While this seemed like a bargain, there was a catch: the buyer aimed to record the loss to offset their income, which isn't permissible until they hold at least 50% of the voting shares. This situation highlights the importance of understanding the tax implications and deal structures in M&A transactions. Navigating these complexities, we helped our client restructure the deal to ensure compliance and financial prudence.

Conclusion

Engaging experienced CPAs *prior to finalizing a merger or acquisition* ensures you're making informed decisions with a clear understanding of the financial landscape. Their expertise mitigates risks, optimizes outcomes, and provides peace of mind as you embark on this pivotal business journey.

Don't wait until the ink is dry to call in the experts. A strong CPA partner is not just an expense; it's an investment in the success of your deal. Contact Cambaliza McGee LLP should you consider any business M&A transaction.