Could M&A Activity be a Springboard for Controllership Transformation?

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Jan 10, 2023, 09:04 ET

NEW YORK, Jan. 10, 2023 /PRNewswire/ -- Over two-thirds of M&A professionals say their organizations' deal work has led to pursuit of some form of finance transformation (68.4%), inclusive of digital transformation, process simplification and automation, according to a new Deloitte poll. While most respondents indicate that such M&A-inspired transformation takes place post-transaction (33.6%), others initiate it during a transaction (21.9%) or pre-deal (12.9%).

As a result of M&A activity, respondents say their organizations' controllership teams now leverage advanced technologies like analytics (21.2%), enterprise resource planning modernization (21.1%) and workflow management (15.6%).

"For many controllers, CFOs and their teams, transactions offer a long-awaited business case to kick-start controllership-centered transformation efforts," said Maria Bunch, a Deloitte Risk & Financial Advisory principal in transaction execution, accounting, reporting and integration, Deloitte & Touche LLP. "Fragmented controllership processes and disparate systems are common among merging companies, making it challenging for controllers and finance leaders to execute required deal activities like financial due diligence, deal accounting, regulatory reporting, post-transaction auditor reviews and new business transactions. As a result, dealmaking often results in investments focused on streamlining controllership systems and enhancing the flexibility and agility needed to transact, manage financial close and report within the new company structure."

In the year ahead, respondents expect that the greatest challenge to finance or accounting teams supporting M&A activity will be the continuation of manual, outdated, or duplicative business processes (28.4%), followed by lack of appropriately skilled talent (26.2%) and the presence of disparate or outdated finance and accounting technology (25%).

"Increasingly, management teams are trying to discern how and when to pursue controllership transformation initiatives alongside transactional activity," said Jenny Gilmore, a Deloitte Risk & Financial Advisory managing director in controllership accounting and reporting services, Deloitte & Touche LLP. "Since most respondents expect their organizations to pursue M&A activity in the coming year, we suspect many organizations will also focus on transforming their controllerships, whether that involves modernizing workflow or ERP systems, adopting analytics or exploring other special-purpose technologies to execute carveout financial statements or purchase accounting."

Questions leaders could ask to help determine controllership transformation needs during a transaction include:

What processes, systems and roles are needed for "Day 1" post-transactional operations? What about for the first financial close?
How will the controllership function support the business in achieving overall transaction strategy? Is it currently positioned to do that successfully?
Will our common information model (chart of accounts) efficiently meet internal and external reporting before and after the transaction?
In the case of mergers or acquisitions, do synergies (e.g., process efficiencies and technology) exist in the controllership functions of both companies that would be beneficial to achieve prior to deal closing?
Will the transaction add complexity to the controllership function (e.g., more tax jurisdictions or legal entities, multiple charts of accounts, new supply chains) that will require new technologies or systems to manage?
Is this transaction part of a series of transactions that might trigger additional or more urgent transformation needs?

About the online poll

Over 1,700 professionals involved in M&A for their organizations were polled during a recent Deloitte Center for Controllership webcast, titled "How mergers and acquisitions drive controllership transformation," on Oct. 13, 2022. Answer rates differed by question.

About Deloitte
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SOURCE Deloitte