US companies seeking to acquire acquisition targets headquartered outside of the United States should understand the foreign target’s financial information, including the application of non-US GAAP and the target’s accounting policies, and identify where GAAP and policy are not aligned with the buyer’s basis of preparing its financial information.
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Decoding key metrics in cross-border acquisitions: March 2013
Understanding a potential acquirees (“M&A Target”) reporting of its operating results is critical to determining potential purchase price adjustments. The process of determining purchase price adjustments is more complicated when an M&A target is outside of the United States, because typically a buyer receives the non-US target’s financial information prepared on a basis that is inconsistent with how the buyer reports operating performance.
Because operating performance measures have a direct impact on how buyers value the target business, US bidders need to understand the basis of a foreign target’s financial information, such as the application of non-US GAAP as well as the target’s accounting policies, and identify where GAAP and policy are not aligned with the buyer’s basis of preparing its financial information.
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