Purchase Price Allocation - Target Company with negative book value (SHE)
I'm doing an analysis of the purchase price allocation in a situation where a target company has negative book value (A L + SHE).
When seeking to allocate my total purchase price and derive the goodwill amount, I find myself having goodwill > the total purchase price.
As example:
Total Purchase Price = $100
Target Assets = $10
Target Liabilities = $15
Goodwill = 100 - NBV = 100 - -5 = 105?
Would love some thoughts here, I presented a simple illustration to work towards higher level discussion quickly.
I thought Cash outflow of $100, you get $10 in assets, but 15 in liabilities, you have to add the extra $5 as additional goodwill. So Goodwill is $95.
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