Why Accounting Still Matters in M&A, Even If It Sounds Boring

When I first got into M&A, accounting felt like one of those things you just had to get through.

It was not the part of the job people spoke about. Conversations were usually around deals, strategy, valuation, or “interesting” sectors. Accounting sat somewhere in the background, necessary, but not particularly exciting.

That changed pretty quickly once I started working on live deals.

You realise early on that most of the work isn’t in the headline numbers. It is in understanding what sits behind them. Two companies can show similar growth or similar EBITDA, but once you start digging into the accounts, they can look completely different.

A lot of that shows up when you are building or reviewing models. A three-statement model seems mechanical at first, but it really is not. Small things start to matter more than you expect. Revenue growth doesn’t mean much unless you understand what it’s doing to cash. EBITDA can look strong while working capital quietly builds in the background. You start noticing that even when a model “works,” it doesn’t always reflect how the business actually behaves.

That is usually where accounting stops being theoretical and starts becoming useful.

The same thing comes up in adjustments. Almost every deal involves some level of normalising EBITDA, and that is rarely straightforward. You’ll see costs labelled as one-offs that do not feel entirely one-off, or expenses pushed below the line that arguably should not be there. Over time, you get more comfortable asking what is actually recurring and what isn’t, but that only really comes from understanding how things are treated in the accounts.

Working capital is another area that does not look particularly interesting on paper but becomes very real in a deal context. You might see a business with decent margins, but once you look at receivables or inventory, you realise it needs more cash to run than the income statement suggests. In some cases, that only becomes obvious when you compare periods or start thinking about what “normal” should look like.

Even deal structures end up tying back to accounting more than you would expect. The difference between a locked box and completion accounts, for example, sounds like a structural choice at first. But in practice, it comes down to how comfortable you are with the underlying numbers. With a locked box, you are relying on a historical snapshot, so you spend more time getting comfortable with what is in those accounts. With completion accounts, the focus shifts to how things might move up to closing. Either way, you are still relying on the same accounting understanding to make sense of it.

Over time, you also start to notice patterns. Sometimes earnings look clean, but cash flow does not quite follow. Sometimes margins improve, but it is not immediately clear why. Sometimes the balance sheet looks simpler than you would expect. None of these things are necessarily red flags on their own, but they’re usually worth understanding. And more often than not, the answers sit somewhere in the accounting.

I think that is when it stopped feeling “boring” to me. Not because the concepts themselves became exciting, but because they started to explain things that weren’t obvious otherwise.

It also changes how you approach the job more generally. You spend less time taking numbers at face value and more time trying to understand how they are built up. You become a bit more sceptical, but in a useful way. And you get more comfortable linking different parts of the financials together instead of looking at them in isolation.

I don’t think accounting is the most visible part of M&A, and it probably never will be. But it is one of the parts I end up relying on the most.

Not because it is a separate skill, but because it quietly underpins almost everything else.