I understand assets get written up/down because the book value differs from the fair market value, but why does this happen in an M&A or an LBO?
Is it because values of assets must be re-assessed and marked-to-market in a transaction, hence a write-up/down?
Thanks in advance.
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Google "Business Combinations Accounting" and/or "Purchase Accounting" if you want the nitty-gritty details. In its most simple form, the assets and liabilities get re-stated to fair value in an acquisition (any excess gets allocated to Goodwill).
Is there any write down of assets during M&A? (Originally Posted: 12/31/2017)
Hi guys,
Breaking Into Wall Street materials covered a lot about write-up of assets that can take place during M&A and how DTL can be created. Would you ever have write-downs as well?
I don’t think so but wanted to check. One example I can think of is one where you purchase $100 equity value company for $50. In that case, you will just recognize one time gain on investment I believe (or does this also need to be followed by write-down of these assets or is it simply changing the tax-basis for these assets?) .
Any thoughts will be helpful. Prepping for interviews.
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