To structure and communicate M&A deals effectively, companies must understand the impact of acquisition accounting on the newly merged company’s earnings. A focus on more robust pre-acquisition valuation helps mitigate the risk of acquisition accounting estimates being significantly different from what is ultimately recorded at transaction close.
This is more important than ever as a result of the new accounting standards increasing the potential for post-close earnings volatility. Companies will be better positioned to assess the accretive or dilutive impact of a transaction if an effective pre-acquisition valuation is performed during the due diligence phase.
PwC can advise companies during the diligence phase as they analyze a target and evaluate the impact on post-acquisition earnings. Unlike “standard” models that are commonly used, PwC’s deal-driven approach focuses on a target’s business rather than relying solely on comparable transactions.
By integrating PwC valuation specialists into the diligence team, Private Equity investors, Corporate Boards, and Managers can mitigate the risk of earnings surprises while performing a more robust analysis that can easily be converted into a post-deal valuation required for financial reporting and tax needs.