Could anyone give me the standard adjustments to pro forma the financial statements for an acquisition? I have an idea, but I don't know all of the standard adjustments.
I/S: Sum all line items. Interest income/expense will likely change due to opportunity cost on cash/use of debt to make acquisition, but this is fairly straight-forward.
B/S: Sum line items. Adjust for intercompany receivables/payables (if they exist). Remove cash/add debt adjustment if necessary. Remove target's equity (?) from total S/H equity. Remove debt from target's BS. What else is there? I feel like I'm missing something pretty simple here. This is assuming a 100% acquisition, so no need for non-controlling adjustments. I know you remove some costs from the equity (transaction costs?), but I'm not completely sure.
C/F: So I understand how this works for forward-looking statements, but how does it work for the current period (say we were modeling the transaction on a yearly basis, what would the cash flow be based off of for 12/31/09?). Do you simply take the acquiror's previous B/S vs. the PF'ed B/S to get the change in accounts? This sort of trips me up, even though it should be pretty simple.
One additional question: when putting together a combination model, do you generally simplify (i.e. combine line items to make it a shorter model and so the line items match between target/acquiror), or do you use the line items given by the companies and model it out that way?
Thanks for the help.
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