Is an accountant really required?? What is their actual role?

by a searcher from Indian School of Business

1 year ago

Hi everyone, I am a first time, self funded searcher in the process of getting my first LoI signed, and curious about the role of an accountant. If one has a basic understanding of finance/accounting and feels comfortable doing a crude/rudimentary proof-of cash, along with hiring a firm to do QofE, do you even need a separate accountant at all?

My plan is to work with the best lenders and lawyers that I can, and to pony up for QofE, but I am unable to see what incremental value an accountant would bring. Also I've had terrible experiences with accountants in the past, and frankly it seems like they might be a drag on the forward momentum of the deal. 

I would love to hear examples of how accountants add value and what else I might be missing here? And if indeed they are really required, what qualities should one look for when retaining an accountant?

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searcher from Vanderbilt University - Owen Graduate School of Management

I think they are most useful when financials are complex / lumpy - which quality self funded search deals are often not (certainly exceptions). If you have a solid understanding of accounting / their revenue recognition, and the financials / operations are simple, stable, and relatively clean, a 3rd party QofE may be more of a formality. However, it's possible they uncover something they you may not, or have seen other deals in the same industry that you may be able to pick their brain on. They can also help with leverage when setting a normal working capital peg, or asking for a purchase price adjustment if an unfavorable ebitda adjustment is uncovered. Overall, if it's a deal >$750k of ebitda, it's probably worth spending the extra $20k in deal fees for a 3rd party QofE. You can also phase the QofE to avoid large dead deal fees. If it's a smaller simple deal, I'd just do everything yourself.

1 year ago | like reply | 1 like

searcher from University of Greenwich

A switched on "commercially aware" accountant is a must have component of successful teams and businesses. Emphasis on "switched on" and commercially aware.
An accountant will aid value, depending on their skill set and experience.

Their role is to support and aid the business, adding to the decision making process and providing facts to add in the business development. They are a key component.

1 year ago | like reply | 1 like

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