Acquisition Integration. Challenges and Solutions

Transcription

1 Acquisition Integration Challenges and Solutions

2 Introductions Jay Turchin, Director Tax Process & Technology McGladrey New York, NY Julia Summerville, Director Tax Process & Technology McGladrey Charlotte, NC Panel: Deborah Larke, General Manager Tax Systems, Process & Controls, Duke Energy Matthew Wagenmaker, Director, Taxes - Operations, SPX Corporation 1

3 Mergers, Acquisitions and Dispositions Economic downturn and subsequent recovery has resulted in an uptick in mergers and acquisition activity Impact on the tax department (in order of magnitude) People Data Technology Process 2

4 Example Manufacturer 20 person tax department Financial Oracle, Hyperion, HFM Provision Excel Compliance CorpTax Company A Acquires Company B Divergent companies, systems and processes Financial Services 5 person tax department Financial - SAP Provision OneSource Tax Provision Compliance OneSource Income Tax 3

5 Think Critically What are the intended and unintended CONSEQUENCES of the alternatives? What does this look like from another POINT OF VIEW? What QUESTIONS need to be answered? What ISSUE are we trying to resolve? What ASSUMPTIONS are we making? What CONCEPTS will help make sense of the situation? What ALTERNATIVES might we pursue? Adaptive Strategies

6 Assumptions Exercise MAN SON LES ECT OBJ AGE Adaptive Strategies

7 Assumptions 1 What assumptions did you make? MANAGE LESSON OBJECT Adaptive Strategies

8 Rearrange the tiles to spell three familiar words AMI EEF LIA RDS RWO THR Adaptive Strategies

9 What assumptions did I break? THREEFAMILIARWORDS Adaptive Strategies

10 People Challenges What can we say here Uncertainty Companies typically reduce headcount as a result of a merger, acquisition or disposition - This can be a major challenge for the acquiring company, especially if integration is delayed Which tax department is the surviving tax department who is the new head of tax - This is not always the head of the acquiring company System administrators are key to the ongoing use of technologies 9

11 Data Challenges How will the financial reporting system be impacted? - Will they be integrated? All other sources of data domestic & foreign Depth of Integration? - One surviving general ledger system - What about major sub-systems inventory, accounts receivable or payable? Timing of Integration - May require short-term and long-term solutions 10

12 Technology Challenges System by system, which one will survive? - Detailed review of different systems - One (Corptax, OneSource) implementation does not equal another - May have the same technology but may be implemented differently Compliance considerations - Short period returns, state filings Data Warehouse - Does either company have one? Document Management - Especially important for acquired company 11

13 Process Challenges Some tax departments are more compliance focused than provision focused (Tax Life Cycle focused?) Size and breadth of tax departments Does the tax department have full ownership of the provision process or is the finance group also involved Consider the timing of activities annually and quarterly for both companies 12

14 International Aspects Knowledge base of international operations - Outside preparers - Provision knowledge - Transition Integration teams - Ongoing training Geography and language challenges Technology Financial reporting systems GAAP to STAT versus STAT to TAX adjustments People turnover Lessons learned 13

15 Other tax types and systems Sales and use tax - This one can be major accounts receivable and compliance impact - One (Vertex,Sabrix) implementation does not equal another Unclaimed property - For some industries this is a major headache Annual reports and miscellaneous franchise tax filings - Easy to fall through the cracks 14

16 Best Practices Recommendations Planning and Communication Tax department participates on the front end due diligence for acquisition Tax department involved in the integration of the financial reporting systems for the acquisition will drive timing and availability of information Communicate to management the tax technology impacts of the acquisition don t wait for someone to ask you 15

17 Best Practices Recommendations Technology Which technologies will survive don t assume acquiring company has better systems, may be able to leverage from acquired company technologies Prepare a matrix of all tax technologies for all tax types for both acquiring and acquired company Address FAS 109 reporting this includes impact of changes to federal state liabilities resulting from acquisition impact on tax attributes, tax adjustments (such as Sec. 199) and credit calculations and for state instant unity and consolidated filings 16

18 Best Practices Recommendations Relationship Work closely with the acquired companies tax department and tax providers meet with them in person, the stronger the relationship the better integration. Take the time to understand the acquired companies process listen and share with them how you do things 17

19 Power comes from being understood. SM When you trust the advice you re getting, you know your next move is the right move. That s what you can expect from McGladrey. That s the power of being understood. Julia Summerville [email protected] Jay Turchin [email protected] McGladrey is the brand under which RSM McGladrey, Inc. and McGladrey & Pullen, LLP serve clients business needs. The two firms operate as separate legal entities in an alternative practice structure. McGladrey & Pullen is a licensed CPA firm providing assurance services. RSM McGladrey provides tax and consulting services. RSM McGladrey, Inc. and McGladrey & Pullen, LLP are members of RSM International ( RSMI ). RSM International is the sixth largest network of independent accounting, tax and consulting firms. The member firms of RSMI collaborate to provide services to global clients, but are separate and distinct legal entities which cannot obligate each other. Each member firm is responsible only for their own acts and omissions, and not those of any other party. McGladrey, the McGladrey signature, The McGladrey Classic logo, The power of being understood, Power comes from being understood and Experience the power of being understood are trademarks of RSM McGladrey, Inc. and McGladrey & Pullen, LLP McGladrey & Pullen, LLP and RSM McGladrey, Inc. All Rights Reserved 18