The Role of Accountants 

Remember that the purpose of your advisors is to make you – and your entire management team look as credible as possible by anticipating issues and preparing disclosure in a professional manner. And the best way to do this is by ensuring that your financial statements are as clear and accurate as possible before you go to market.

Your accountant will play a critical role in assisting you and making sure your financials are clean and consistent before your business goes on the market. Your accountant may also be involved in financial due diligence, as well as in examining the financial and tax implications of the transaction. 

Your accountant will typically be less involved in your transaction than your M&A attorney, although the extent to which this is the case varies based on the transaction. If you’re selling a smaller business with a simpler set of legal agreements and less-involved negotiations, it’s possible your accountant will play a more involved role than your attorney, especially if issues related to the financials are discovered during due diligence.

Your Accountant’s Role in the M&A Process

Here are the standard roles your accountant will play in the sale of your business: 

• Review Financials: Ask your accountant or CPA to review your financial statements, tax returns, and bank statements, and correct any inaccuracies before providing your records to a buyer. This can take the form of a review, audit, or quality of earnings report. They should also reconcile your financial statements, tax returns, and bank statements to ensure they match.
• Tax Advice: Your accountant can also advise you on the tax implications of the sale. When it comes to tax advice, I recommend involving your accountant as soon as possible because you’ll have much more flexibility in tax planning and maximizing after-tax transaction revenues if you consult with your tax advisor during the exit-planning process. Your accountant can also estimate the federal and state tax consequences of selling your business under varying scenarios. These may include whether you’re selling your assets only or your entire entity, whether you’ll be paid in one lump sum versus installments over time, and whether your estate plan should also be a consideration. Additionally, they can prepare tax returns associated with the sale, such as the income tax return of a corporation that sells its assets or the tax return of an individual who sells their shares or corporate stock. 
• Allocation of Purchase Price: Your accountant can also assist in allocating the sale price among the various assets being sold by completing IRS Form 8594, the Asset Acquisition Statement under Section 1060.
• Transaction Structure: Your accountant can help review the financial aspects of the deal, including structuring earnouts, seller financing, or other contingent payments.
• Working Capital Calculations: Most acquisitions include working capital as a component of the purchase price. As a result, working capital and balance worksheets must be prepared for the closing and then re-examined after the closing to measure any differences in working capital between the two periods. Your accountant can assist with these calculations. 

Tips for Hiring an Accountant

When hiring an accountant, you should look for the following:

• Experience: Probe to see whether the CPA has M&A experience. Ideally, your accountant should have experience on both the buy side and the sell side in a range of mid-sized transactions. 
• Accessibility: You need an accountant who’s highly responsive and quickly responds to phone calls and emails. Many stages of the process are time sensitive, and you can easily lose a buyer if you or your team are slow to respond.
• Expertise: A CPA is ideal. A word of caution – not all CPAs are sufficiently qualified to provide all the services suggested above. That’s because many CPAs specialize in preparing individual tax returns but don’t routinely assist in business sales.