Internal Audit: The Overlooked M&A Success Factor For Aircraft Lessors

January 15, 2025

Mergers and acquisitions (M&A) are a common growth strategy for aircraft lessors, but they’re also notoriously risky. Deals often fall short of delivering expected value, and one reason is that organizations overlook risk management and internal audit’s role during the M&A process. 

At Zeevo, we’ve seen this story play out across the leasing and finance industries. Whether it’s an acquisition of a portfolio of aircraft or a full-scale merger, lessors face significant operational, financial, regulatory, and cultural risks. That’s where Internal Audit (IA)can make a real difference.

Yet, many organizations engage internal audit too late—or worse, not at all. So, how can IA contribute to a smoother, more successful M&A? Here are some insights and lessons learned from years of working with aircraft lessors and other industries.

Where Does Internal Audit Fit in the M&A Lifecycle?

Internal audit’s involvement shouldn’t begin after the ink dries on the deal. To effectively manage risk, IA should play a role throughout the entire M&A lifecycle, including:

1. M&A Strategy & Target Screening

IA’s role: Promote awareness of the control environment early on. Open communication with leadership about potential risks ensures that decisions are informed not just by financial metrics but by operational realities.

Question: Who in your organization typically drives IA’s engagement at this stage—CFO, board, audit committee?

1. Due Diligence

IA’s role: Ensure due diligence is comprehensive across financial, operational, compliance, and technology areas. Assess the target’s internal audit function, if applicable, and help develop plans for post-close integration.

Consider: Have you experienced challenges where critical risks were missed during due diligence? How could earlier IA involvement have prevented those issues?

1. Transaction Execution

IA’s role: Provide advisory support to transaction teams. Keep an eye on evolving regulatory or compliance issues,especially in global transactions where cross-border leasing introduces additional complexity.

1. Integration

IA’s role: This is where things get real. Review policies, procedures, and controls at the acquired entity. Assess whether post-close goals, such as synergies or operational efficiencies, are being met. IA should also revise its risk assessment to reflect the combined entity’s new risk landscape.

Question: How does your organization handle post-close integration audits? Is there a steering committee that oversees change control and risk across departments?

Key Success Factors for Internal Audit in M&A

From our experience working with lessors, these are the key success factors for IA involvement in M&A:

• Engage Early: Early and ongoing involvement of IA, ideally at the strategy stage, helps reduce the risk of unpleasant surprises post-close.
• Perform Robust Risk Assessments: Prioritize risks and focus IA resources where they can add the most value—this ensures that time and effort are spent on what matters.
• Maintain Strong Communication: Frequent touchpoints with the project management team help IA stay in the loop and provide timely guidance on emerging risks.
• Collaborate with External Auditors: Proactively engage with external auditors and compliance teams to ensure alignment, especially for Sarbanes-Oxley compliance in public companies.
• Participate in Steering Committees: Being part of executive steering committees ensures IA has a voice in key decisions and can advocate for robust controls and risk management.

Lessons Learned from the Field

1. Culture Matters: Culture might seem intangible, but it plays a significant role in post-merger success. A mismatch in corporate culture can derail even the best-planned integrations.
   
   Tip: IA can help assess cultural risks during due diligence and flag potential red flags that could affect integration.
2. Data Integration Can Be a Nightmare: Combining systems, consolidating data, and ensuring reporting accuracy post-close are among the most challenging aspects of M&A.
   
   Tip: IA should review data migration plans and reporting processes to ensure accurate, reliable financial information post-merger.
3. Resource Turnover is Inevitable: During M&A, key resources often leave—whether due to uncertainty, dissatisfaction, or opportunity. This can cause disruption, especially in critical functions like finance and IT.
   
   Tip: IA should monitor staffing risks and suggest mitigation strategies, such as cross-training and succession planning.

HOW ZEEVO CAN HELP.

At Zeevo, we believe IA isn’t just about compliance—it’s about creating value by ensuring risks are managed, synergies are realized, and integrations run smoothly. Whether you’re an aircraft lessor navigating a complex acquisition or a company exploring your next big deal, we’re here to help.

Feel free to reach out if you want to discuss how internal audit can make your next M&A a success. We’re always happy to share insights (and a few lessons learned the hard way).