4 key M&A activities for life sciences accounting teams

Ann R. Suding, Kristin Orrell, Ryan McNally

Learn about what life sciences accounting teams should consider during the deal life cycle.

Merger and acquisition (M&A) activities involving life sciences companies can be complex. Successfully navigating deals requires an understanding of the accounting intricacies involved throughout the transaction life cycle.

From accounting nuances to controls, our team identified four important steps for life sciences accounting teams to consider as their companies engage in M&A activities.

Evaluate whether your transaction is a business combination or an asset acquisition

Life sciences companies engaging in M&A activities should carefully consider whether a transaction qualifies as an asset acquisition or a business combination under Accounting Standards Codification (ASC) 805, “Business Combinations.” This evaluation is important because there are significant differences in the accounting for an asset acquisition versus a business combination.

For transactions accounted for as a business combination, be aware of the impacts of ASU 2021-08

Accounting Standards Update (ASU) 2021-08, issued by the FASB in late 2021, requires an acquirer to measure the acquired entity’s contract assets and liabilities in accordance with FASB guidance ASC 606, “Revenue From Contracts With Customers,” versus at fair value.

Evaluate ASC 606 implications of your target acquisition company

More than five years after its introduction, many life sciences companies still struggle with the application of ASC 606. Assessing the ASC 606 implications of a target acquisition company early is a great way to get ahead of an area that is often heavily scrutinized by auditors and key stakeholders.

Understand how M&A activities could affect your controls

It’s critical that companies consider internal controls when identifying, analyzing, and closing M&A deals. An acquirer should establish strong controls to address a range of activities, including obtaining approvals from executive management and the board of directors, recording the transaction appropriately, and evaluating the new products and business processes acquired.

Taking a thoughtful, thorough approach on these steps doesn't just benefit the current transaction. It also can help organizations more effectively manage risks associated with future M&A activity.

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Experienced life sciences specialists who understand M&A accounting

We know navigating accounting demands regarding life sciences transactions can be complicated because we've helped organizations like yours manage those situations. Contact us with questions or concerns you might have about M&A accounting issues to learn more about how we can work with you to address them.

Ann R. Suding

Partner, Consulting

+1 317 208 2519

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Kristin Orrell

Managing Director, Accounting Advisory

+1 646 231 7237

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Ryan McNally

Consulting

+1 630 575 4391

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