Finance Integration Playbook

This finance integration checklist provides a framework for the necessary finance-related responsibilities that should be met for successful integration. This checklist is tailored specifically to assist practitioners accomplish the financial aspects of integration during an M&A transaction.

• Most suitable during integration planning and execution for complex M&A transactions.
• Includes typical financial guidelines and requirements needed for successful M&A integration.
• DealRoom encourages teams to customize these checklists to accommodate the unique needs of your deal and M&A process.

What Does a Finance Post Merger Integration Checklist Include?

The following checklist includes the requirements needed to complete financial aspects of integration, both in planning and execution. This checklist includes the main financial obligations tasks needed to ensure that the integration of a target company is adequately conducted, meaning that all financial matters are appropriately considered. This checklist serves as a guideline and should be customized to fit the specifics of each M&A deal.

1. Target Operating Model, Team Staffing Approach, and Program Budget

Identifying Day 1 goals, targets and policies is one of the first things to consider when conducting financial integration. Below  are the main points to determine when planning integration to ensure an overall successful M&A deal.

• Identify Major Finance Processes in Scope for the Transaction per the Finance Charter
• Identify Subprocesses for each Major Finance Process
• Define Day 1 Finance Organization Design, Roles, & Responsibilities
• Define Day 1 Finance Processes and Policies
• Define Day 1 Finance Facilities/Locations
• Define Day 1 Finance Systems
• Conduct Cross-Functional Validation to Ensure Day 1 Target Operating Model Assumptions are Consistent and Viable
• Based on Target Operating Model, Define Integration Program Exit Activities/Milestones
• Review Overall Finance Internal Projects Roadmap, Postpone All Non-Critical Roadmap Projects to Allow Acquisition Focus
• Alongside Integration Leadership, Determine Finance Program Staffing Model Considering all TOM Requirements, Scope, and Timing Needs
• Compile Overall Finance Program Budgeting in Accordance with Guidelines Established by Integration Leadership, Adding Contingency Commensurate with Integration Uncertainty, i.e. 10-15% Initially, Reducing with Iteration When Possible

2. Address Finance Organization Design, Processes, and Policies

Address any new finance jobs along with their onboarding processes as well as any new or altered policies, performance metrics or training requirements. This section will need extensive assistance from human resources to ensure successful implementation.

• Draft Any New Job Descriptions and Get Approval from HR
• Ensure All Finance Onboarding Requirements Addressed by Program-wide Onboarding Plan, Fill Gaps if Needed
• Document New/Altered Finance Processes, Including Controls
• Document New/Altered Finance Policies
• Identify and Address Finance Training Requirements for Day 1
• Address Departmental Performance Measurement and Incentives

3. Address Finance Facilities

The following requirements ensure that all needed facilities are designed and ready for Day 1 implementation, this includes office space, inventory and technology systems.

• Ensure Facilities Plan Aligns with Finance Organization Design Including Seating, Conference Rooms, and Auditor Facilities
• Ensure Facilities Plan Accommodates Finance Network and Telephony Requirements, Including Access to All Finance Systems Day 1

4. Address Finance Systems

This section references needed technology and data structures finance teams will need post-close for functionality, security and efficiency. These requests will need to cooperation of available IT departments or persons.

• Ensure All Finance Systems are Included on IT Systems Inventory
• Define Desired Functionality for New/Altered Systems
• Define New Finance Data Structures: Chart of Accounts, Legal Entities, Profit Centers, Cost Centers
• Define New/Altered Requirements for Compliance:Tax, Statutory/Regulatory Reporting, Customs, GAAP/IFRS, Intercompany, Historical
• Conduct Data Mapping into New/Altered Data Structure
• Refine Finance RICEFW Inventory with IT (Reports, Interfaces, Conversions, Extensions, Forms, and Workflows)
• Assist IT with User Testing of Finance Systems for Day 1 Deployment
• Ensure Adequate Finance Data Retention/Archiving for Historical Reporting and Compliance

5. Complete Deal Accounting Activities

Establishing, preparing and executing financial agreements such as escrow, purchase price and capital stack is the unique responsibility of those conducting financial integration. Being the point of contact for the following will ensure a secure deal for all stakeholders.

• Establish Capital Stack for the Transaction
• Establish and Fund Escrow Arrangements
• Prepare Purchase Price Accounting
• Schedule and Execute Asset Inventories
• Schedule and Execute Inventory Physical Counts
• Prepare Short Period Reports and Tax Returns

6. Transition Reporting, Budgeting, and Asset Management

Financial integration requires determining and evaluating the following contingencies that will be used for budgeting, accounting and asset management post-close.

• Determine Accounting Principles for the Combined Entity
• Evaluate Deferrals. Contingency Accruals, Etc. And Adjust for Combined Entity as Needed
• Evaluate Historical Budgeting and Forecasting Materials from Diligence
• Evaluate and Consolidate Capital Spending Plans/Commitments
• Align Capitalization Policies, Including WIP, Capitalized Labor, Etc.
• Setup Fixed Assets in Asset Management System at PPA Valuations
• Establish Opening Balance Sheet
• Rollout New Chart of Accounts, Profit Centers, and Cost Centers
• Establish New Budgeting Policies and Procedures
• Prepare Initial Combined Budgets and Forecasts
• Rollout New Accounting, Asset, and Budgeting Policies
• Prepare and Execute Company-wide Training on Changes
• Prepare Audit Support for Changes to Policies, Principles, Etc.
• Design and Implement New/Altered Monthly Close Process
• Design and Implement New/Altered Reporting Process, Including Historical Comparatives and Management Discussion/Analysis
• Create Plan for Historical Accounting, Asset, and Budget Data Retention and Reporting for Tax and Audit Purposes

7. Transition Procure to Pay

Evaluating and transitioning the target companies spending patterns while settling their existing vendor contracts is an important aspect of financial integration. Practitioners must also complete the following in order to adequately implement the target company’s financial policies into their own.

• Evaluate Diligence Material for Spending Patterns
• Evaluate Vendor Contracts, Including Contracts for Contingent Staff/Consultants, Make Strategic Sourcing Determinations
• Create Plan for Contract Novation, Cancellation, or Replacement for Each Vendor
• Evaluate Open Purchase Orders and Purchase Commitments and Create Transition Plan
• Create Plan for Pre-Close Invoice Settlement (Migrate or Settle In Place)
• Create Plan for Historical Procurement and Payables Data Retention and Reporting for Tax and Audit Purposes
• Setup Tax Reporting and Compliance for Vendors Where Necessary, Including Integration Into Any Tax Calculators/Systems
• Setup New Vendors
• Migrate Open Purchase Orders
• Integrate P-Card, Company Credit Card Programs
• Establish Combined Procurement Policies and Procedures, Including Approval Matrices
• Prepare and Execute Company-wide Training on Changes to Policies/Procedures
• Coordinate with Change Management and Communications on Vendor Communications and Outreach

8. Transition Credit, Invoicing, and Collections

Evaluating the target company’s credit, invoicing and collections policies with their customers in order to create a plan to close necessary orders and setup tax reporting. This information will often be available within the diligence material and can be used for more efficient integration and employee on-boarding.

• Evaluate Diligence Material for Purchasing and Collection Patterns
• Evaluate Credit and Collections Policies
• Evaluate Customer Contracts for Financing, Payment, and Collections Terms
• Coordinate with Sales/BU on Customer Contract Novation Approach, Including Approach to Common Customers
• Evaluate Any Factoring or Other Receivables Financing Arrangements
• Create Plan for Pre-Close Invoice Settlement (Migrate or Settle In Place)
• Setup Acquired Customers
• Migrate Open Sales Orders
• Create Plan for Historical Credit, Sales, and Collections Data Retention and Reporting for Tax and Audit Purposes
• Setup Tax Reporting and Compliance for Customers Where Necessary, Including Integration Into Any Tax Calculators/Systems
• Establish Combined Procurement Policies and Procedures, Including Credit/Financing Terms
• Prepare and Execute Company-wide Training on Changes to Policies/Procedures
• Coordinate with Change Management, Communications, and Sales on Customer Communications and Outreach

9. Transition Treasury and Cash Management

Evaluating diligence material for the target company’s banking information, financial contracts and possible debt will allow integration practitioners to develop the appropriate transition approach.

• Evaluate Diligence Material for Banking Information Including Accounts, Signatories, Transfer/Sweep Arrangements, Etc.
• Evaluate Diligence Material for Financial Contracts/Options/Hedges and Develop Transition Approach
• Evaluate Diligence Material for Other Financial Instruments/Investments and Develop Transition Approach
• Evaluate Restricted Cash Requirements (Deposits, Balance Arrangements, Etc.) and Develop Transition Approach
• Evaluate Overdraft Requirements and Develop Transition Approach
  
• Evaluate Short/Long Term Debt and Develop Transition Approach
  
• Finalize and Communicate Strategy and Approach for Migration of Banking Relationships, Including Determination of Signatories
  
• Evaluate Payables and Receivables Workflows and Processes for Congruence with Banking Strategy
  
• Ensure Appropriate Users are Setup/Cutoff in Banking Systems, and Systems Include Any New/Altered Accounts
  
• Integrate Cash Forecasting and Reporting Processes
  
• Integrate Hedging Processes
  

10. Transition Tax and Legal Entity

A critical aspect of financial integration include evaluating and transitioning the target company’s tax arrangements, legal entity structure and any development incentives. Practitioners should create a plan for implementing new systems as well as legal entity data retention/reporting.

• Evaluate Diligence Material for Direct and Indirect Tax Arrangements/Obligations and Filing Groups
• Evaluate Diligence Material for Statutory Reporting Obligations
• Evaluate Diligence Material for Legal Entity Structure
• Evaluate Diligence Material for Carryforwards/Carrybacks
• Evaluate Diligence Material for any Tax, Customs, or Development Incentives or Arrangements, Including Bonding and Incentive Zones
  
• Evaluate Fiscal Year Ramifications
  
• Develop Tax and Legal Entity Step Plan, Including Addressing Tax Ramifications of Capital Stack for Transaction
  
• Setup/Close Legal Entities as Described by Step Plan
  
• Develop Transfer Pricing and Intercompany Agreements
  
• Prepare Required Statutory/Tax Authority Notifications, Including Transfer Pricing, Filing Group Changes, and Changes to Filing Periods
  
• Ensure All Entities and Parameters are Properly Implemented in Tax Systems
  
• Create Plan for Historical Tax, Customs, Statutory, and Legal Entity Data Retention and Reporting
  

11. Program Exit

A program exit strategy provides the means for practitioners to clear dependencies, document lessons learned and plan for future transactions. This will also ensure the longevity of successful integration and value creation by outlining an exit strategy for the organization’s leadership.

• Document Achievement of Integration Program Exit Criteria
• Ensure All Critical Dependencies on the Project Plan Have Been Cleared
• Document All Lessons Learned and Participate In Program Lessons Learned Readout
• Archive All Program Documentation for Use On Future Transactions
• Request Permission for Transition to Run-The-Business from Integration Leadership
  
• Get Business Owner Sign-Off for All Remaining Transition Tasks
  
• Notify Integration Leadership, Change Management, and Communications of Exit and Provide Run-The-Business Points of Contact

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