Whats the point of pre-deal PPA?
I have noticed that Big4 offer pre-deal purchase price allocation services. Its usually a rough estimate.
Why would a public/private company or a sponsor want to know this? How does it tie into strategy and earnings?
Do you have any resources to learn more about these things?
bump
There's various things like significant testing which are tied to the PPA
Also tax/ other benefits from intangible amortization, understanding how to structure the deal, etc.
A pre deal PPA will give you a more accurate idea of what the opening balance sheet will look like. You will also have a more accurate picture of what amortization will be going forward on pro forma P&L.
A pre-deal PPA primarily aims at assessing the accounting impact of the acquisition on the acquirer's financial statements. For this purpose, the acquiring company first identifies all assets and liabilities that it is about to acquire. Second, it conducts an indicative valuation of the target's net assets.
Above describes what it is, but the primary purpose is to inform the accretion / dilution of EPS calculation. Goodwill has no impact to EPS because you do not amortize it while most other tangible and intangible assets can have an impact on EPS. So they want to know how much of the purchase price is going to be parked on the balance sheet forever (Goodwill) vs. how much is amortizable.
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