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How can you improve budget and forecast accuracy during a merger or acquisition?

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Mergers and acquisitions (M&A) are complex and risky transactions that require careful planning and execution. One of the key challenges for corporate finance professionals is to ensure that the budget and forecast of the combined entity are accurate and realistic. This can help avoid costly surprises, align expectations, and support strategic decision-making. In this article, we will explore some of the best practices and tips to improve budget and forecast accuracy during a merger or acquisition.

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Hanan Hasbullah

Senior Accountant @ Coreo Real Estate | Head of Finance

1 Understand the deal rationale and value drivers

Before you start working on the budget and forecast, you need to have a clear understanding of the deal rationale and the value drivers of the acquisition. This will help you identify the sources of synergies, the integration costs, and the potential risks and opportunities. You also need to communicate with the management and the deal team to align on the strategic objectives, the assumptions, and the timeline of the integration.

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Hanan Hasbullah

Senior Accountant @ Coreo Real Estate | Head of Finance
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Understanding the deal rationale and value drivers is fundamental during a merger or acquisition. It's like deciphering the map to our destination, helping us navigate the complexities and make strategic financial decisions based on the core reasons for the deal and the factors driving its value.

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2 Gather and validate data from both parties

One of the most critical steps in budgeting and forecasting is to gather and validate data from both parties. You need to ensure that the data is consistent, reliable, and comparable across the two entities. You also need to reconcile any differences in accounting policies, reporting standards, and financial systems. You may need to adjust the data for any non-recurring items, one-off transactions, or intercompany eliminations.

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3 Use a flexible and collaborative tool

To improve budget and forecast accuracy, you need to use a flexible and collaborative tool that can handle the complexity and uncertainty of the M&A scenario. You need a tool that can easily consolidate data from different sources, create multiple scenarios and sensitivities, and track changes and revisions. You also need a tool that can facilitate collaboration and communication among the stakeholders, such as the deal team, the management, the business units, and the external advisors.

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Hanan Hasbullah

Senior Accountant @ Coreo Real Estate | Head of Finance
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Using a flexible and collaborative tool is crucial during mergers and acquisitions. For instance, a cloud-based financial platform can allow teams from both companies to simultaneously access and update financial data, ensuring accurate and real-time budgeting and forecasting, even when operating in different locations or time zones.

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4 Incorporate feedback and contingency plans

Another way to improve budget and forecast accuracy is to incorporate feedback and contingency plans. You need to solicit feedback from the relevant stakeholders, such as the business units, the functional leaders, and the external advisors. You need to validate the assumptions, the projections, and the synergies with them, and incorporate any adjustments or corrections. You also need to develop contingency plans for any potential risks or uncertainties, such as regulatory approvals, customer retention, or integration issues.

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5 Monitor and update the budget and forecast regularly

Finally, you need to monitor and update the budget and forecast regularly to reflect the actual performance and the changing conditions of the M&A process. You need to compare the budget and forecast with the actual results, and analyze any variances or deviations. You also need to update the assumptions, the projections, and the synergies based on the new information or developments. You need to report and communicate the results and the updates to the management and the deal team, and provide insights and recommendations.

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Hanan Hasbullah

Senior Accountant @ Coreo Real Estate | Head of Finance
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Regularly monitoring and updating the budget and forecast is vital for staying on course during a merger or acquisition. It's like adjusting the sails of a ship in changing winds, ensuring financial plans remain accurate and aligned with the evolving reality.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you improve budget and forecast accuracy during a merger or acquisition?

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1 Understand the deal rationale and value drivers

2 Gather and validate data from both parties

3 Use a flexible and collaborative tool

4 Incorporate feedback and contingency plans

5 Monitor and update the budget and forecast regularly

6 Here’s what else to consider

Corporate Finance

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