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M&A failures: Receivables and inventory may be key
Author(s) -
Sagner James S.
Publication year - 2011
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.21733
Subject(s) - accounts receivable , current asset , asset (computer security) , investment (military) , business , inventory investment , key (lock) , finance , accounting , economics , actuarial science , computer science , market liquidity , political science , law , computer security , politics , econometrics
Abstract Researchers estimate that at least 75 percent of all merger‐and‐acquisition (M&A) deals fail to meet the expectations of the acquirer, of the acquiree, or of investment bankers. The reasons cited include incompatible management cultures, marketing strategies that do not mesh, overly optimistic financial projections, and more. But one critical factor in M&A—too often overlooked—is the accuracy of important current asset accounts, particularly accounts receivable and inventory. These concerns are often forgotten as investment bankers, accountants, and attorneys focus their attention on the “big picture” of the deal. This article examines these two current asset accounts, provides examples of problems that occurred in publicly held and private companies, and suggests specific metrics you can use to monitor receivables and inventory in takeover candidates. © 2012 Wiley Periodicals, Inc.