Adding M&A fee to Goodwill
Would you add the m&A fee to goodwill, or would you subtract it from SHE? Or, would you expense it in OpEx?
Trending Content
| +147 | How to stop feeling like shit for not making it in IB? | 57 | 35s | |
| +110 | If Tik Tok is forced to sell, what banks do you think would be involved in the deal? | 54 | 1h | |
| +70 | Updated LA Banking Scene (2024) | 52 | 46m | |
| +38 | Ranking banks that went under | 20 | 2h | |
| +34 | Burnt Out M&A ASO | 18 | 2s | |
| +34 | Recruiting in the Fall | 6 | 1h | |
| +32 | A strategy for SA applicants late to the game like myself | 15 | 7h | |
| +29 | Relevance of A-Levels for U.K. London recruiting | 21 | 13h | |
| +26 | Series 79 Help / Tips to Pass The First Attempt | 11 | 2d | |
| +25 | Intern Ettiquette | 4 | 12h |
Career Resources
Adding M&A fee to Goodwill (Originally Posted: 03/25/2015)
Would you add the m&A fee to goodwill, or would you subtract it from SHE? Or, would you expense it in OpEx?
Edit: I was wrong.
Sorry the above is wrong. Acquisition fees are expensed as incurred and should reduce retained earnings. The theory, per FASB, is that M&A fees do not represent a portion of the fair value paid for the business. Financing fees, however, are capitalized as a long-term asset to be amortized into interest expense over the term.
http://www.pwc.com/us/en/transaction-services/assets/pwc_business_combi…
Yeah Kobayashi, thanks. That is what I figured. After the revised FAS 144, I believe you don't include the M&A fees towards good will, but DO take it out of SHE, so effectively, in a LBO your equity check would be greater by the M&A fee, correct?
Depends on how you want to fund the fees. No reason you can't target an equity check of $xmm and fund the fees with newly issued debt. But yes, if you are setting up your model to "plug" for the equity than, all-else-equal, the greater your M&A/legal fees the higher your equity check.
The way this actually works in practice is some sort of AcqCo or HoldCo created by the sponsor will incur these fees through a P&L and will actually reduce income taxes payable. So the hit to SHE is less than the full fee. If you're working on the sell-side nobody wants to deal with this level of complexity so it's fine to just debit SHE the full fee amount on your opening/closing BS and ignore the P&L impacts.
Amet voluptatem quas est quod labore et adipisci. Enim odit et accusantium nostrum voluptatem quibusdam. Nemo dolorum dolore accusantium voluptatibus. Non delectus officiis sit qui eligendi consequatur qui. Et pariatur cumque dolorum ipsam mollitia. Quis eaque nisi soluta qui.
Fugit voluptatem doloribus sed iste. Dolorem quia voluptatem et pariatur laudantium maiores sequi quia.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...