TrueValue M&A Network

Accountants

The accountant is the professional most owner-managed businesses already have, and on a deal they do three distinct jobs: get the numbers ready, advise on the tax, and produce the completion accounts that settle the price.

Accountants

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What accountants do

Before a sale, an accountant prepares the historic and management accounts a buyer will want to see, normalises the figures, and deals with the tax position of the sellers. For a buyer, the accountant reviews the target’s numbers (or commissions a specialist financial due diligence firm to), advises on the structure and prepares the acquiring entity. After completion, they draw up the completion accounts against which the price is adjusted for working capital and net debt.

General practice accountants and transaction specialists are different animals. A firm that files a company’s accounts every year may or may not have a partner who has sat on the other side of a sale; ask.

When to engage them

A seller should involve their accountant one to two years before a sale — long enough to tidy the balance sheet, separate personal expenditure from the business, and take advantage of any tax planning that requires time. A buyer should involve theirs before the offer, so the structure is right from the start.

Usually active at

  • Exploring
  • Evaluating a specific business
  • In due diligence
  • Legal documents and completion
  • Completed
  • Selling a business

What they typically help with

  • Historic and management accounts a buyer will accept
  • Normalising earnings and preparing add-back schedules
  • Tax planning for sellers and structuring for buyers
  • Completion accounts and the working capital adjustment
  • Setting up the acquiring entity and post-completion reporting

Questions to ask before you engage

  1. 1. Which partner has transaction experience, and on how many deals in the last three years?
  2. 2. Will you handle the completion accounts, and have you negotiated a completion accounts dispute before?
  3. 3. How do you charge — fixed fee for the transaction work, or time?
  4. 4. Are you independent of the other side’s advisers?
  5. 5. What in our numbers would a buyer’s due diligence team pick up on?

How accountants are paid

Transaction work is usually charged on time or as a fixed fee for a defined scope (preparing the accounts, completion accounts, tax structuring). Ask for a scope and an estimate before the work starts, and separate the transaction fee from the ongoing compliance fee.

How TrueValue fits alongside

When the accounts are dropped into a deal, TrueValue reads them into an income statement, balance sheet, cash flow and working capital analysis, labelled with the provenance of each figure — filed, management-stated or illustrative. That is the pack an accountant starts from, and the working capital peg and its true-up live on the deal’s post-completion record in the deal workspace so the completion accounts settle against numbers everyone can see.

Frequently asked

Can my existing accountant handle the sale of my business?

Often, for the preparation and the tax; less often for the deal itself. Ask whether they have completed transactions and whether they would recommend a specialist for financial due diligence or the negotiation.

What are completion accounts?

A set of accounts drawn up as at the completion date, used to adjust the price for the actual working capital and net debt against the levels assumed in the offer. The mechanism, the accounting policies and the dispute process are all set out in the share purchase agreement.

Is financial due diligence the same as an audit?

No. An audit gives an opinion on whether the accounts show a true and fair view. Financial due diligence is an investigation for a buyer into the quality of earnings, working capital and net debt, and reports on risks to the price rather than on compliance.

Listings in the TrueValue M&A Network are provided for information. A listing is not an endorsement or a recommendation, and TrueValue does not guarantee any professional’s performance. You must carry out your own due diligence before engaging anyone, verify regulated status independently with the relevant regulator, and seek qualified legal, financial and tax advice where appropriate.