Financial Terms: Financial Integration

What is financial integration?

Financial integration refers to the unified management and monitoring of the financial system and accounting system of the acquirer. The goal of M & A is to create more new value through the enhancement of core competence and the enhancement of competitive advantage. Therefore, in the process of financial integration, enterprises must closely focus on this goal, take cost management, risk control and financial management process optimization as the main content, through financial integration, strive to make unified management of business activities after merger and acquisition, and unified planning for investment and financing activities. To maximize the integration and synergy of mergers and acquisitions. Therefore, financial integration after merger and acquisition should follow the following principles: timeliness principle, unity principle, coordination principle, innovation principle and cost benefit principle.

Contents of financial integration

Financial integration, different mergers and acquisitions companies have different practices, but in general can be summarized as: "one center, three in place, seven integration".

The financial integration of M & A companies must be centered on the maximization of enterprise value, which is also a basis for the integration of financial management goal oriented integration. If deviating from the center, the financial integration will lead to bureaucracy and low efficiency. Taking the maximization of enterprise value as the center, financial integration must take the development strategy of merger and acquisition company as the criterion. Through financial integration, the operation and management of merger and acquisition companies should be unified and standardized so as to make unified planning of investment and financing activities of mergers and acquisitions and maximize the integration and synergy effect of merger and acquisition companies.

Specifically, the company's financial integration includes the following basic elements:

(1) goal oriented integration of financial management

The goal of financial management is an important financial theory problem, because it directly affects the construction of financial theory system, and is also a financial practice problem that can not be ignored, because the determination of financial goals directly determines the choice of various financial decisions. In the microeconomic analysis, the profit maximization is usually taken as the objective function of the manufacturer, and the analysis of the manufacturer's behavior is carried out. But in the theory of finance, the goal of maximizing profits has been widely criticized. Maximizing shareholder wealth and maximizing enterprise value is the most commonly used financial management objective. But the view of shareholder wealth maximization only emphasizes the interests of shareholders. With the development of society, modern enterprises can only achieve sustainable development only by serving stakeholders. The maximization of enterprise value is regarded as a financial goal, which takes into account the legitimate rights and interests of stakeholders, and pays attention to the sustainable development of enterprises or long-term stable development. It also takes into account the interests of all sides: the maximization of enterprise value is not only consistent with the interests of creditors, but also the interests of operators and other employees, and at the same time, it helps to maximize the wealth of society.

In many cases, the financial goals of the two parties are inconsistent, so they must be integrated. The goal of integration is, of course, the maximization of the value of enterprises. The goal of financial management is a theoretical description of the results of enterprises' optimization of financial management. It is the blueprint for the future development of enterprises. It is very important for mergers and acquisitions to integrate financial goals. Only by integrating objectives can financial operations be integrated. It helps to make financial decisions scientifically and contributes to daily financial behavior. High efficiency And standardization, which will help financial personnel to establish the concept of scientific financial management. Of course, this goal must be clear, measurable, controllable and cost effective.

(two) integration of financial management system

The integration of the financial management system is the key to ensure the effective operation of the M & a company. The integration of the financial management system of all successful M & A enterprises is successful. On the contrary, the financial system integration of the failed M & A companies is almost failure.

1. integration of financial institutions and functions

The setup of organizational structure should be related to the complexity of business process, financial management and accounting volume. Size Consistent. If the business process is complex, financial management and accounting The accounting organization should be larger and the internal division of labor should be more detailed. The financial management and accounting institutions can be divided according to their functions. Vice versa. The division of responsibilities and responsibilities between financial organizations and departments must be clear and mutually restrictive. All departments and staff members within an organization should have clear responsibilities, responsibilities and specific tasks, so as to clarify responsibilities and responsibilities between departments and personnel so as to avoid mutual wrangling.

The establishment of financial organizations should meet the requirements of streamlining and efficiency, prevent duplication of jobs, overstaffing, avoid waste of manpower and material resources and low efficiency working environment. In addition, in the process of the integration of financial institutions, we should also pay attention to the establishment of institutions in line with the degree of centralization and decentralization. The functional departments of the financial institutions of the M & A should be adapted to the financial management responsibilities and responsibilities. This is an important guarantee for the financial departments to perform their duties effectively.

2. integration of financial management system

After integrating the financial institutions and financial personnel, the next key point is the integration of the financial management system. Only by integrating the three aspects of personnel, institution and system can we lay the foundation for the effective financial control of the acquisition company. The integration of financial system is ultimately the selection of a series of financial policies implemented by enterprises. Since the financial policy is a policy of independent choice, all the enterprises before mergers and acquisitions make or choose financial policies that are conducive to their own development according to their respective general goals and practical requirements. Therefore, before the merger, the financial policies of the M & A parties in different interest positions will be very different. After merging, the parties are merged into an enterprise group and have consistency in the overall goal. Therefore, when choosing financial policies, they can no longer start from the perspective of individual enterprises, but should choose or formulate financial policies based on the interests and objectives of the whole group after the merger. The integration of financial system includes investment system, financing system, fixed assets management, liquidity management, profit management, wage system management, financial risk management and so on. For the export-oriented M & A companies, it also includes the integration of international financial management. The integration of financial system is not easy, and there are many specific difficulties. For example, the wage system of each company is different, so it is a sensitive issue when the system is integrated.

(three) integration of accounting system

The integration of accounting system is a specific guarantee for the unified financial system. It is also an important means for M & A companies to obtain timely and accurate information of the acquired enterprises, and it is also the basis for unified performance evaluation caliber. Whether acquisition or merger, if the M & a side wants to realize the merger of the two sides' operations, the account form, certificate management and accounting subjects must be unified so as to facilitate business integration.

(four) integration of cash flow internal controls

After the merger and acquisition, the capital flow and financial pressure are quite large. Therefore, the fund management after M & A is very important. The main task of financial integration is to meet the demand for capital after adjustment and adjustment. That is to provide sufficient funds to support the adjustment of operation and organization, broaden the financing channels and obtain various financial support. To this end, the most important task of enterprises after implementing M & A is to achieve capital control of target enterprises and implement integrated fund operation. After the completion of the M & A, the M & A enterprises should lock in the bank accounts of Target Corp in time, return the goods in time, clean up the current accounts, and strictly control the financing and long-term investments. The budget management system and strict approval procedures should be applied to the use of funds, so as to achieve the goal of unified regulation of target enterprises through a series of effective measures.

(five) integration of rights and responsibilities of M & A companies

M & A companies operate effectively and effectively control. The principle of unified leadership and hierarchical management is usually adopted. The specific form of hierarchical management varies according to the organizational structure of the merger and acquisition company. But in any case, the enterprises that carry out the responsibility accounting system must make each responsible unit have a very clear scope of power and responsibility for the economic activities they carry out, so as to ensure that the rights and responsibilities are small, the rights and responsibilities are large, and the powers and responsibilities are closely integrated. In management accounting, the scope of power and responsibility, that is, the activity area that each unit can control, is called the "responsibility center". The establishment of responsibility center is the inevitable result of the development of enterprise's organizational structure to decentralization.

The integration of the rights and responsibilities of M & A companies should be carried out in accordance with the principle of "responsibility center". The responsibility center can be divided into three categories: "cost center", "profit center" and "investment center" according to the size of the controlled area and the scope of power and responsibility. Only by setting up a clear power and responsibility mechanism can we effectively achieve the effective integration of strategy and tactics, investment development and production and operation, capital operation and asset management, revenue and expenditure, and ensure sustained, stable operation and rapid development of the company.

In short, financial integration is the core content of integration after merger and acquisition, and plays a key role in improving the overall resultant force and core competitiveness of enterprises. The financial advance and successful integration of enterprises after mergers and acquisitions can also provide a strong guarantee for the success of other resource integration. At the same time, the successful integration of finance is also conducive to the realization of the overall strategic objectives of enterprises.