Successful mergers are a result of addressing risk, compliance, and technology at multiple levels. Whether planning for a merger or working through integration issues, utilize the questions below to prepare your organization for success.
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Risk
Effective mergers are an outcome of addressing risks at multiple levels. Key risk areas include:
- Organizational risk – How will the new entity be structured? Will the entities merge or operate independently?
- Financial risk – Can profits be maintained or losses mitigated? What drives profits and losses?
- People risk – How will talent preservation, leadership transition and corporate culture be managed?
- Control environment risk – Are internal controls adequate for the new organization structure? Who owns it?
- Process risk – Are business processes similar or will significant retraining be required?
- Post-merger integration risk – Are synergies achievable? Is the timeline too aggressive? Is there adequate internal support?
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Compliance
Onerous rules and regulations must be considered. Most importantly:
- Are there cleared contracts triggering DSS notification requirements? Are there issues related to foreign ownership?
- How will the transaction impact FAR and CAS compliance? Will there be cost accounting practice changes
- Do intellectual property ownership of valuation issues exist?
- Are there Federal Supply Schedule Compliance issues? How will multiple schedules be harmonized post- transaction?
- Does historical DCAA, DOL, and other audit agency activity indicate issues? What is the current audit activity? How will risk related to open years be mitigated?
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Technology
Merger preparation includes critical decisions about historical financial data. Consider the following during acquisition planning:
- Will financial systems be integrated? What is the scope of the integration?
- How does integration impact custom interfaces and reports?
- Will integration occur immediately or at a future date?
- Will summary balances or transactional detail be converted?
- Is data to be converted clean and accurate or is cleanup required?
- How will historical data be accessed? Paper reports, data warehouse or read only access to historical systems?
- How compatible are the account, organization, and project structures?
For more information on this topic, or to learn how Baker Tilly government contractor specialists can help, contact our team.