Mergers & Acquisitions
Ask your merger related questions here, both concepts and modeling-specific.
Questions/Discussions
Sort by Date ▼ / Top Rated
Register for free or log in at the top right of this page to join the discussion
Let's assume the following example: Co.A has acquired 80% of Co.B for $1million in cash, and has incurred $20,000 in merger related costs. Co.B's net assets (100% book value) are $500,000, and for simplicity purposes let's assume fair value equals book value in this case. Co.B has an existing Goodwill on its balance sheet of $100,000. Assuming we are not taking into account the FAS141R and IFRS#3(R), we would do the following when consolidating in relation to goodwiil and minority interest:
Goodwill = $1,000,000 + $20,000 - [80% * ($500,000 - $100,000)]
Minority interest = ($500,000 - $100,000) * 20% OR $500,000 * 20%? - So, essentially my doubt is: minority interest should be calculated on the same basis as goodwill, which means that we calculate the remaining portion (20%) over the identifiable net assets (net assets less target's existing goodwill) or calculated over the net assets directly (in this case $500,000)?
I tried that on the Complex LBO model and it does not balance if I simply calculate MI with net assets (without subtracting the target's existing goodwill)...
Also, shoud we blow out the target's existing goodwill EVERYTIME or not (I know when it's a 100% acquisition it doesn't matter, but in this case of 80% acquisition it seems that it matters)?
I appreciate your help on this matter.
Thanks in advance.
P.S: I have some of the questions I have posted on the forum over the past weeks in word documents here with me. So, in case you guys still need it just let me know and I can send the files through. Read More