The Acquisition Is Signed. Now the Real Work Begins.
Between Series A and Series C, many growth-stage companies make their first acquisition. It might be an acqui-hire to bring a specialist team on board, or a small bolt-on to add a product capability or customer base. In both cases, the finance integration is almost always underestimated relative to the legal and commercial work that preceded the deal.
The announcement goes out. The lawyers declare the transaction complete. And then, typically, the finance team is handed a problem: two sets of bank accounts, two payrolls, two accounting systems, and a set of purchase price allocation obligations under IFRS 3 that nobody on the commercial team fully anticipated.
This article covers the key finance integration workstreams that every CFO must drive in the first 100 days, the accounting consequences of an acquisition, how to build and track synergies honestly, and how to present the acquisition's financial impact to the board in a way that builds rather than erodes confidence.
The First 100 Days: A Finance Integration Framework
The first 100 days of integration are the highest-risk period. Systems are in flux, people are unsettled, and the ordinary controls of both businesses are under stress. The CFO's job is to establish a clear integration finance plan before Day One, not after it.
A useful way to structure the plan is by workstream, with explicit owners and deadlines. The four workstreams that require immediate attention are: day one readiness, accounts payable and receivable cut-over, payroll integration, and banking and treasury consolidation.
Day One Readiness
Day one readiness means that on the date the transaction completes, the acquired business can continue to operate without interruption. From a finance perspective, this requires: confirmation that all existing supplier payment runs can still execute, that the acquired company's bank accounts remain accessible under the new ownership structure, that key finance personnel are retained and briefed, and that the integration PMO has a finance representative attending daily stand-ups from day one onwards.
Accounts Payable and Receivable Cut-Over
AP and AR cut-over is the most operationally intensive workstream in the first 30 days. The key decisions are: which accounting system will become the single system of record (and by when), how the acquired entity's creditor and debtor ledgers will be migrated, and how intercompany transactions between acquirer and target will be coded and eliminated on consolidation. Common failures include duplicate supplier records generating duplicate payments, and invoices being raised in one system while the corresponding purchase order exists only in the other.
Payroll Integration
Payroll is typically the most time-critical workstream because the consequences of failure are immediately visible and damaging to staff morale. The CFO must confirm: the target's payroll provider and payroll cycle, whether any employment terms differ materially from the acquirer's standard terms, the treatment of employee share schemes and option plans at the acquired entity, and the correct employer entity for PAYE and National Insurance purposes post-completion.
Banking and Treasury Consolidation
The acquired entity will have its own banking relationships, potentially with different banks and different account structures. In the short term, the priority is ensuring visibility over cash balances in all accounts, updating authorised signatories, and confirming that any overdraft facilities or revolving credit facilities at the acquired entity are either retained or repaid on completion as per the terms of the acquisition agreement.
IFRS 3: The Accounting Consequences of an Acquisition
IFRS 3 (Business Combinations) requires that all acquisitions be accounted for using the acquisition method. This has several specific consequences for the acquirer's balance sheet and income statement that a CFO must understand before the transaction completes, not after the auditors arrive.
Goodwill Calculation
Goodwill arises where the consideration transferred exceeds the fair value of the net identifiable assets acquired. The calculation sounds straightforward but the substance is often not. The key steps are: establish the total consideration transferred (including deferred consideration and contingent consideration at fair value at the date of acquisition), identify and measure all identifiable assets and liabilities at their fair value at the acquisition date, and calculate goodwill as the residual. Goodwill is recognised as an asset on the balance sheet and tested for impairment annually under IAS 36 (it is not amortised under IFRS, though it is amortised under UK GAAP FRS 102).
Fair Value of Acquired Assets
The requirement to fair-value acquired assets is where many early-stage acquirers find surprises. An acquired company may have internally developed software, customer relationships, or brand value that does not appear on its own balance sheet (because it was expensed or never capitalised under IAS 38). Under IFRS 3, these intangible assets must be separately identified and recognised at fair value if they meet the separability or contractual-legal criteria. They are then amortised over their useful economic lives, creating an ongoing P&L charge that has no cash impact but reduces reported profits.
Deferred and Contingent Consideration
Bolt-on acquisitions frequently include deferred consideration (an agreed amount payable at a future date, typically 12 to 24 months post-completion) and contingent consideration (an amount payable only if certain performance targets are met, often called an "earn-out"). Both must be recognised at fair value at the acquisition date. Contingent consideration is remeasured to fair value at each subsequent reporting date, with changes recognised in the income statement. This can create significant income statement volatility where the acquired business either outperforms or underperforms the earn-out targets.
"The earn-out remeasurement is one of the most commonly misunderstood items in acquisition accounting. A business that is performing well post-acquisition will see the liability on its balance sheet increase, creating a P&L charge that corresponds to good trading performance rather than a cost. Boards need to understand this before the first remeasurement hits the income statement."
Synergy Tracking: Building a Framework That Is Honest
Every acquisition is justified, at least in part, by synergies. The question is whether those synergies are real, measurable, and being tracked rigorously once the deal is done. EY's M&A Integration Survey consistently finds that fewer than half of acquiring companies have a formal synergy tracking process in place within the first 100 days. This is a significant governance failure.
Gross Synergies versus Net Synergies
The most important discipline in synergy tracking is distinguishing between gross synergies and net synergies. Gross synergies are the anticipated benefits before integration costs are deducted. Net synergies are what actually falls through to the bottom line after you have paid for the integration. A company that projects £500,000 of annual cost synergies but incurs £400,000 of one-off integration costs to achieve them has a payback period of just under one year, which may or may not be acceptable depending on the cost of capital.
The synergy tracker should therefore capture, for each identified synergy: the gross annual benefit, the one-off cost to achieve it, the payback period, the expected start date, and the person accountable for delivery. It should be reviewed monthly by the CFO and presented quarterly to the board.
Categories of Synergy
For bolt-on acquisitions, synergies typically fall into three categories. Cost synergies include headcount rationalisation, duplicate supplier contracts, shared office space, and consolidated insurance or professional fee costs. Revenue synergies include cross-selling the acquired company's products to the acquirer's customers, or accessing the acquired company's customer relationships for the acquirer's existing products. These are harder to track than cost synergies and should be modelled conservatively. Operational synergies include systems consolidation (migrating to a single ERP or accounting platform), consolidated banking relationships, and shared compliance or finance infrastructure.
Integration Costs: What Gets Disclosed and What Does Not
Integration costs are frequently mishandled in financial reporting, both internally and in board presentations. Under IFRS, acquisition-related costs (transaction fees, legal and advisory costs) are expensed in the income statement as incurred and are not capitalised into goodwill. Post-completion integration costs (redundancy payments, systems migration costs, consultant fees) are similarly expensed as incurred.
The question for the CFO is how to present these costs to the board and, eventually, to investors. There are two broad approaches. The first is to separately disclose integration costs as an exceptional or non-recurring item in the management accounts, making clear that they are one-off in nature and allowing readers to assess the underlying trading performance of the combined business without the distortion of one-time integration spend. The second is to present them as part of the ordinary cost base, taking the view that acquisitions are a core part of the business strategy and that integration costs should therefore be treated as ordinary operating expenditure.
Neither approach is wrong in principle. The key requirement is consistency and transparency. If integration costs are separately disclosed, the basis for that treatment must be clearly defined and consistently applied. The risk of the first approach is that "exceptional" items cease to be exceptional if every acquisition generates a new tranche of separately disclosed costs.
Presenting the Acquisition P&L to the Board
The board presentation of an acquisition's financial impact is one of the more technically demanding tasks a CFO will face in the post-deal period. There are typically three questions the board needs to answer: is the acquired business performing as expected relative to the acquisition model, what is the current estimate of total integration cost relative to budget, and are the projected synergies being delivered on schedule.
A well-structured board report on a bolt-on acquisition should include: a revenue and EBITDA bridge showing the acquired business's contribution separately from the organic business in the first 12 months, a synergy tracker showing gross synergies by category, the integration costs incurred to date against the total budget, and an updated goodwill and intangible asset schedule showing any impairment triggers identified. The IFRS 3 purchase price allocation should be finalised within 12 months of the acquisition date, so the board should also be kept updated on the status of that work.
100-Day Integration Finance Checklist
The following checklist covers the key finance integration activities that should be completed within the first 100 days of a bolt-on acquisition.
Pre-Completion (before Day One)
- Confirm bank account access and update authorised signatories
- Brief acquired company's finance team on integration plan and reporting requirements
- Confirm payroll provider, payroll cycle and next payroll date at acquired entity
- Review acquired entity's AP run schedule and confirm continuity of supplier payments
- Identify key customer contracts and confirm no change of control clauses triggered
- Obtain copies of all finance system credentials and access rights at acquired entity
Days 1 to 30
- Establish daily cash visibility across all bank accounts in the combined group
- Launch IFRS 3 purchase price allocation process with external valuers if required
- Identify and code intercompany transactions between acquirer and target in both ledgers
- Draft integration cost budget and obtain board approval
- Set up synergy tracker with owners and baseline metrics for each identified synergy
- Confirm which finance system will be the single system of record and agree migration timeline
Days 31 to 60
- Complete first consolidated management accounts including acquired entity
- Prepare first board integration report with synergy tracker and integration cost actuals
- Complete payroll integration onto single payroll run
- Rationalise duplicate supplier contracts (SaaS tools, insurance, professional advisers)
- Confirm treatment of acquired entity's employee share schemes under IFRS 2
Days 61 to 100
- Complete AP/AR ledger migration to single system; confirm dual-running period has ended
- Receive first draft of purchase price allocation from valuers; review with auditors
- Update three-year financial model to include acquisition contribution and synergy schedule
- Close out any earn-out remeasurement for first reporting period and present to board
- Produce integration programme retrospective: budget vs actual on cost, timeline and synergies
Key Takeaways
- Finance integration planning must begin before legal completion, not after. Day one readiness for AP, payroll and banking is non-negotiable.
- IFRS 3 requires fair valuation of all acquired identifiable intangible assets. These create ongoing amortisation charges that the board must understand before the acquisition closes.
- Contingent consideration (earn-outs) is remeasured at fair value at each reporting date. A business performing well post-acquisition will generate a P&L charge from this remeasurement, which is counterintuitive and must be explained proactively to the board.
- Synergy tracking must distinguish between gross and net synergies. Every synergy should have an owner, a baseline measurement, and a target delivery date.
- Integration costs should be separately disclosed in management accounts with a clear, consistently applied definition of what qualifies.
- The purchase price allocation must be finalised within 12 months of acquisition. Starting the process on Day One avoids audit pressure and last-minute surprises.
- The board integration report should show four things: acquired business trading performance, synergy delivery, integration cost vs budget, and updated goodwill position.
