6 Free Financial Modeling Lessons...and More.

Enter your e-mail below to get our new Free Modeling Tutorials ($200+ Value).

< previous | next >

M&A income statement adjustments & deferred tax assets/liabilities
 

rossgs210's picture
 
Points)
 on 11/24/12 at 11:00pm

I got these two questions with Citi M&A group. please feel free to share your thoughts and thanks for your help in advance.

1. What certain adjustments on the income statement you have to make in an M&A transaction, i.e. foregone interest income on cash?

2. When company A is buying B, would you expect the transaction to create deferred tax assets or liabilities?

Thanks a lot.

Tags:
BankingOrBust's picture

1. Combine all the major line

 
Points)
 on 11/25/12 at 12:50am

1. Combine all the major line items, ie. Revenues, Operating Expenses Etc. Adjust Pre-Tax Income for Foregone Interest on Cash; Additional Interest Expense from New Debt; Sometimes additional amortization from intangibles created during acquisition. Tax rate would be buyer's tax rate
Changes in shares outstanding for new shares issued for calculating new EPS;

2. I would say that commonly, market value of assets tends to be higher than book value (historical value), which would create deferred tax liabilities as these assets have to be written up during the acquisition.

Not 100% on these, maybe someone could weigh in....

6 Free Financial Modeling Lessons...Straight to Your Inbox.

Confirm your name and e-mail below to get our best tips

Monkey Stats
Account information
We respect your Name and E-mail privacy. By joining you accept our terms of service.