Hi all, have a quick question about about how to think about this scenario:
Let's say Company A is acquiring Company B and we are modeling a transaction date of 6/30/20. Both companies have FYE 12/31. When doing the accretion /dilution math, do we add half-year financials for 2020 of Company B to Company A, or do we add the full 2020 year financials? Thanks!
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You would add LTM company B financials to your close date.
Hm so you would consolidate 12 months of Company B financials even if you haven't owned them for 12 months? Like for example, if the closing date were 6/30/20, would FY2020 revenue (as of 12/31) for Company A be full year FY 2020 Company A revenue + full year FY 2020 Company B revenue, even though Company B has only been a part of the company for 6 months?
It generally depends on the purpose of the a/d and what point you are trying to get across. At least for my bank, we generally do the a/d on the full year following close so it gives the full view of the annual results. I can't think of much of a reason to look at a/d by year end when the transaction closes at 6/30 unless management is comped on it or something. In that case you would follow whatever is in their employment agreement.
Yes, you’ll usually see in 8-Ks or subsequent 10-Qs showing PF financial metrics for the last year or so once the merger goes through.
Got it, thanks. So not really a situation where we would stub financials? I guess it just seems weird to me to be giving the acquirer credit for the target's performance before it was actually purchased by the acquirer.
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