Observations from the front lines

March 2013
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Observations from the front lines

At a glance

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.

Observations from the front lines provides PwC's insight on current economic issues, our perspective regarding the business impacts, and actions we have seen companies taking to effectively address those issues.

Decoding key metrics in cross-border acquisitions: March 2013

Understanding a potential acquiree’s (“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.

Highlights in this issue:

  • Cross-border transactions involve complexities that are particularly challenging due to differences in policies and regulatory requirements.
  • Cross-border acquisitions, in particular, necessitate experience with global standards, cultural knowledge, and a heavy focus on pre-deal assessments.
  • Companies need to bridge differences in key metrics within sellers’ financial information in order to avoid surprises in the post-acquisition earnings from foreign acquisitions.

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