Accounting for M&A: thinking about the challenges

Mergers and acquisitions are central to the strategy of many businesses, but it’s well known that many of them destroy value rather than creating it. Financial reporting should cast light on these activities and tell investors what they need to know about them.

Investors need transparency around the transaction itself and they want to be able to look back after the event and see whether the deal worked. Was it worth the money? How effectively did management execute the merger of the businesses? Did the expected synergies actually materialise?

Accounting for M&A was the topic of last month’s Information for Better Markets Conference here at Moorgate Place. This is the annual flagship event for our Financial Reporting Faculty’s thought leadership work. Each year the conference hosts leading academic thinkers on financial reporting from around the world and leading ‘practitioners’ (in this context, anyone who isn’t an academic). Indeed, one of the strengths of these conferences is the opportunity they create for dialogue – not just among the speakers, but also among the delegates – between researchers and people who are tackling real-world issues in their daily work.

Webcasts of the presentations at last month’s conference are now on our website, and are well worth a look. In addition to speakers from some of the world’s top business schools – Cambridge Judge Business School, Exeter Business School, Harvard Business School and INSEAD at Fontainebleau – we had some excellent practitioner speakers.

If you can spare 15 minutes, I would particularly recommend Marietta Miemietz’s presentation. Marietta is an investment analyst and her talk gives an excellent insight into the problems that investors face in understanding M&A transactions and their consequences, and how financial reporting can help bring transparency. One aspect of her talk that I found of particular interest is her focus on stewardship, a financial reporting objective whose importance is sometimes underplayed. But as Marietta explains, one of the key issues for investors is simply ‘whether management has done a good job’. This is all about stewardship.

Our Information for Better Markets Conferences are unique in bringing together leading researchers and practitioners to discuss a wide range of corporate reporting issues of practical importance. This year’s conference, on 19-20 December, will be on private company financial reporting – a hugely important issue for many of our members. If you’re interested in coming (attendance is free), details are on the event webpage