Financial executives' 2023 plans are being put into action and comprise a variety of different strategies. Despite a recent slump in Mergers & Acquisitions, new research suggests that most financial teams are planning on conducting some form of acquisition over the next year. In a survey conducted back in October 2022, nearly two-thirds of professionals involved in M&A for their organizations said their companies are preparing for an M&A deal this year.
Deals, Deals, Deals! Growth expectations via M&A are high, as 52 percent of companies expect to execute up to five deals. However, the ambition to acquire is capped, with only 10 percent of respondents saying they expect more than five deals over the next twelve months. Some believe that with the excessive amount of change and nuance within industries across the board, an M&A transaction would be the best option for organic expansion to get an advantage over competitors and remain agile. Looking at today's trends, deals will be more strategic, with a lot of due diligence to ensure a strong merger or acquisition that can be profitable sooner rather than later.
Tech Development Through Acquisition. M&A provides an exclusive opportunity for adding value via the target's technology. The technology that organizations acquired is a significant part of the value that justifies the acquisition. Findings indicate that organizations that conducted an M&A transaction significantly enhanced multiple aspects of their organization's major core processes. About 21 percent of survey respondents said tech enhancements around analytics took place post-merger, while another 21 percent reported tech improvements in their ERP modernizations. Another 16 percent reported that they saw the implementation of advanced technologies in their workflows thanks to an M&A deal.
Challenges for Finance and Accounting. When questioned on corresponding challenges faced by a finance and accounting team, respondents were split on what areas of the transaction pose the most significant pain point for finance teams going into 2023. Twenty-eight percent of respondents said manual or outdated business practices are the biggest challenges for accounting teams. In comparison, 26 percent attributed a lack of talent in the respective teams as their biggest hurdle.
An Opportunity for Financial Transformation. With overall innovation undoubtedly on the minds of teams who are purchasing other companies in an effort to expand, a large majority of those surveyed reported their organizations undergoing financial transformation efforts as a result of the M&A process. About 68 percent of respondents said their companies are undertaking these efforts as a direct result of an M&A transaction.
Before entering into any buy/sell agreement, Talley & Company can help you determine optimal deal pricing and structure to achieve your goals from an ROI and tax perspective, accounting for factors that include revenues, future opportunities and contracts, industry trends, and market share. Of course, if you just plan to make a must-have power bid like Ballmer, at least you will know what you are getting into and how far from the baseline to overshoot.