Spin-off transactions are increasing in the marketplace. Is there one in your future? PwC's Neil Dhar, Ravi Rao and Beth Paul discuss the current market trends, key considerations for carve-out financial statements, and how to be successful both during and after a spin-off.
Spin-offs represent a growing trend in recent years. Is there one in your future? Gain insight into the spin-off process including developing carve-out financial statements and creating a sustainable stand-alone entity.
We see a steady pace in the volume of deals for the health services sectors from the first to second quarters with 143 and 138 announced deals (281 total deals), respectively. This volume is also consistent on a year to date basis with 2013 and its 289 announced deals. However, we also note that on a quarterly basis, the second quarter of 2014’s deal volume (138 deals) has declined almost 13% from the same period in 2013 (158 deals).
Corporate finance decisions involving mergers and acquisitions and capital markets have come under increasing scrutiny. Boards of directors and management are looking for objective guidance to help them avoid the ire of shareholders, activist investors, and regulators regarding corporate finance decisions. What qualities should boards and management look for when seeking independent corporate finance advice?
The Mexico government is currently attempting to implement reforms intended to transform the country to make it one of the most vibrant and dynamic economies in the next decade. Many economists, politicians, and businessmen, however, have different views on what these reforms actually mean for Mexican businesses, foreign investment, and the average Mexican citizen and how issues such as security concerns, income inequality and corruption will affect Mexico’s ability to unlock its potential.
Industrial manufacturing mergers and acquisitions activity surged in the second quarter, driven by large deals. Dealmakers seeking strategic assets represented the overwhelming majority of all transactions.
The value of merger and acquisition (M&A) deals in the engineering and construction (E&C) sector in 2Q14 surged to $67 billion from $15 billion in the prior quarter. As a result of the transactions that were involved, the average deal size rose to among the highest levels on record.
Chemicals M&A activity in the second quarter of 2014 more than doubled in value and volume when compared to the same period last year. Mid-market transactions accounted for 68% of total deal activity and over 20% of value.
The pace of transportation and logistics transactions accelerated during the second quarter, as measured by both announced value and volume. However, 2014 is not expected to set records for mergers and acquisitions in the sector.
An uptick in mega deals and the ongoing interest in divested assets and private equity backed businesses, propelled aerospace & defense M&A second quarter value to the highest quarterly total in three years.
Extending the positive momentum from the second half of 2013, equity markets set new highs, IPO markets reached activity levels not seen in years, VC investments harkened back to 2000 levels, and economic outlooks remained modestly optimistic across sectors. Private equity (PE) continued to play an active role in technology, though challenged by strategic buyers who are able to leverage healthy valuations and substantial amounts of cash on hand.
As companies look to maintain market competitiveness and to meet the demands of increasingly sophisticated customers while also managing their profitability, many are implementing a deals desk function as a key business enabler.
Economic obsolescence can become a significant issue when a company has or is acquiring assets – such as store or restaurant locations – that generate separate identifiable streams of cash flows. This publication discusses factors that typically cause economic obsolescence and the potential impact, including illustrative examples and case studies.
The most experienced dealmakers say they know what to do — and are reporting success. Successful integration needs to happen quickly and systematically as the period of time between deal announcement and deal close and the initial period post-close are critical to realizing quick wins and setting the course to deliver deal value over the long-term.
Technology companies have long relied on M&A to pursue innovation, gain top talent and build competitive advantage. In this webcast, we explore how leaders in other industry sectors can learn from technology company successes in acquiring innovation.
What are the latest comparable statistics for mergers and acquisitions and active trades in the financial services industry? Check out PwC's quarterly valuation summaries for the Banking, Insurance and Asset Management sectors. Insights include: trends in market multiples, related transactions, and transaction benchmarking analysis.
Technology deals for the first quarter of 2014 started strong, continuing the momentum of the second-half surge of 2013. Equity markets remained near record highs and IPO activity remained robust in an improving economy. Software and Internet deals continue to dominate as cloud, mobile and data drive much of the industry focus today.
In the loop is an executive-level series addressing important financial reporting and regulatory issues. Our first edition discusses how changes in private company accounting could affect future deal or financing strategies.
The entertainment, media and communications (EMC) deal market is off to a strong start with a few high dollar deals announced in the first quarter. We cover the landscape of deals including private equity and cross-border deals, and dive deep into the emergence of Multi-Channel Networks (MCN) as the new hot property in the digital video space. We recap recent deal activity in the most active sectors, including: Broadcasting, Communications, Internet Related/Information Services, Recreation & Leisure and Film/Content.
Deal activity is off to a good start led by numerous large deals, and confirms our positive outlook for 2014. Core retail trade sales improved in March which may give some rise in optimism for the remainder of the year after a slow start. IPO activity moderates in the first quarter after coming off a strong performance in 2013. However, the R&C pipeline is the strongest the sector has seen in recent years.
5/12/14 | US Capital Markets and Accounting Advisory Services
Unexpected expenditures and accounting adjustments – like those arising from environmental obligations – can dramatically impact capital budgeting and future earnings. Companies have found that practices vary widely across sectors and both engineering and accounting expertise are critical in assessing environmental obligations.
Did you miss our Mergers & Acquisitions webcast on Tuesday, May 20th? If so, you still have an opportunity to view the webcast and earn CPE credit through our on-demand version. This webcast features Beth Paul, PwC Strategic Thought Leader, Ravi Rao, National Office SEC Services Partner, and Dimitri Drone and Matt Sabatini, both Partners in our Transaction Services group. It covers accounting, financial reporting and valuation considerations in connection with the acquisition of a business.
Industrial manufacturing mergers and acquisitions activity rose in the second half of the year, with oil and gas end-markets driving deals in the industrial machinery sector. Deal strategies are expected to shift to growth-oriented transactions in 2014.
Deal activity in the aerospace and defense (A&D) industry was off to a slow start in 2014. While aerospace-focused deals are expected to continue at high valuations, the defense mergers & acquisitions (M&A) market remains sluggish. Unless long-term defense priorities become clearer, a sustained increase in the overall pace of A&D M&A is unlikely.
Large deals continue to drive engineering and construction industry mergers and acquisitions, especially in the oil, gas, and petrochemical sectors. Risk aversion is impacting deal activity in emerging markets.
Chemical industry mergers and acquisitions increased in advanced economies, with shale gas opportunities playing a major factor in the United States. Chemicals industry companies are pursuing a variety of deal strategies, including joint ventures, spin-offs, and complete divestitures.
The number of logistic transactions is on the rise and private equity and industry players continue to look for strategic purchases, particularly of specialty 3PL providers. Third-party logistics providers are becoming increasingly indispensable due to their high level of customization, service quality, or service accuracy. Because of the number of well-capitalized players and the need for this operational intelligence and sophisticated capabilities, we expect this momentum of deals to continue.
This is the second in our series focused on navigating the waters of a cross-border acquisition. The series looks at various aspects along the deal continuum, including pre-acquisition due diligence and strategies, financial reporting requirements, tax implications, and post-acquisition considerations. This edition provides insights on SEC and other financial reporting requirements that may apply in a cross-border acquisition.
The robust market for initial public offerings (IPOs) continued in the first quarter of 2014, and momentum is expected to remain strong into the second quarter, according to IPO Watch, a quarterly survey of IPOs listed on U.S. stock exchanges by PwC US.
M&A in pursuit of innovation is a high-potential source of growth. That's what we learned in a survey of tech companies, where 76 percent of innovation-focused acquisitions met or exceeded expectations. Led by the right inorganic growth strategy and accompanied by a holistic approach to deal execution, business leaders in all industry sectors can apply key lessons learned from innovation-intensive industry sectors to their own business and accelerate growth. Read to explore the key success factors in acquiring innovation.
Over the past several years, interest in Africa as a destination for investment has been growing at a steady clip. Private equity was the first to make serious inroads into this heterogeneous continent of 54 countries. More recently, multinational corporations and a variety of other investors have entered the fray.
In 2008 and 2011, our tri-annual M&A Integration survey reports underscored the need for early planning and an accelerated transition as critical factors for successful integration. This 2014 survey report confirms these factors remain in today’s deals, and offers additional insights – showing that while early planning and rapid transition remain important, the commitment to integration completion over the long-term can be the deciding factor for deal success.
3/25/14 | US Capital Markets and Accounting Advisory Services
Recently the FASB issued an Accounting Standards Update to permit private companies to amortize goodwill acquired in a business combination, and to apply a simplified goodwill impairment model. This change is intended to help reduce reporting complexity for private companies; however, private companies should carefully consider this alternative, especially for those considering an initial public offering.
This is the first in a series focused on navigating the waters of a cross-border acquisition. This edition focuses on the pre-acquisition phase, including how GAAP differences can impact valuation and how a company can manage the financial risk exposure that arises from a cross-border acquisition.
After a 2012 filled with uncertainties, 2013 witnessed a slow rebuilding of confidence and, perhaps, the charting of a path toward growth. After a first half that saw quarterly technology deal volume drop, optimism took hold with a doubling of activity in the second half. In the end, technology deal activity finished the year 18% lower, amidst IT spending growth of less than 1%. Equity markets and IPO pricings sounded a consistently contrarian note, soaring to long-forgotten highs. These leading indicators of spending and deal growth provide promise for 2014.
Today the landscape is changing, as the operational controllership function is less about technical accounting and financial reporting support (handled by specialist technical teams) and more about creating value for the company while managing risk. The operational controller roles across the companies have evolved into new focus areas, such as reducing legal entities or improving shared services or working proactively with deal and commercial teams—all designed to drive more simplification, standardization, cost savings or revenue growth.
The entertainment, media and communications (EMC) deal market is gaining momentum once again and companies face greater competition for attractive acquisitions. We look at deal drivers and the deal outlook for 2014 in the most active sectors, including: Broadcasting, Communications, Advertising & Marketing, Publishing, Recreation & Leisure and Film/Content.
Despite a lull in deal activity during Q2, total transaction value for 2013 surpassed the $100 billion mark for the first time since 2008, anchored by one of the largest consumer products deals in history with the $28 billion Heinz deal. There were several factors which challenged consumer sentiment throughout 2013, however consumer sentiment was up year-over-year driven by labor and economic improvements. We expect R&C deal activity will continue its positive momentum, but will remain challenging as supply and demand of quality assets for sale may remain divergent.
2/13/14 | US Capital Markets and Accounting Advisory Services
The broadening of private company securities sales has helped drive the development of two new offerings from the NYSE and NASDAQ OMX. Both solutions, although different in approach and focus, are designed to provide a platform and market structure for private companies to manage and conduct the sale of private company securities.
Welcome to PwC’s inaugural 2013 US Capital Markets Watch. Reflecting the integrated nature of capital markets, we have broadened the discussion beyond Initial Public Offerings (IPOs) to include the equity follow-on market, the convertible market, debt markets, and spin-offs.
1/23/14 | US Capital Markets and Accounting Advisory Services
Strong demand for IPOs continued in the fourth quarter of 2013, capping a robust year for the capital markets and setting the stage for continued growth in 2014. The window for raising capital in a robust IPO market tends to open with bursts of popularity then close quickly. This requires a constant state of readiness for the required IPO document that is filed with the Securities and Exchange Commission “SEC”. Don’t let unforeseen financial reporting items be the road block to accessing the IPO markets.
Strong demand for initial public offerings (IPOs) continued in the fourth quarter of 2013, capping a robust year for the capital markets and setting the stage for continued growth in the new year, according to IPO Watch, a quarterly survey of IPOs listed on U.S. stock exchanges by PwC US. Total IPO volume for 2013, as of December 17, reached 237 public company debuts, easily surpassing overall volume of 146 IPOs in 2012 and representing the most active environment for newly listed companies since 2007.
12/17/13 | US Capital Markets and Accounting Advisory Services
The re-emergence of a Mergers & Acquisitions (“M&A”) technique known as a “Reverse Morris Trust” (“RMT”) has proven to provide some unique advantages over other strategic alternatives as a vehicle for divesting divisions or a separate business. Companies considering a divestiture should become knowledgeable on the recent comeback of this strategic alternative so they can actively engage in conversations with their advisors.
The third quarter of 2013 realized a slight uptick over the prior two quarters in the volume of healthcare services deals with 138 total transactions. However, the value of the dealsannounced in Q3 2013, $15.8 billion, was up 35% over the second quarter. In both volume and value, the year-to-date period for 2013 continues to lag the same period in 2012 with volume down 4.6% and value down 25%.
Internet, Communications and Publishing sub-sectors saw increased deal activity, contributing to the 9% growth in announced deals for the 3 quarters ended 2013 versus prior year. In addition to deal trends for the year to date, a deeper look at one sub-sector -- telecom operations -- and the deal opportunities abounding as telecom companies look to improve network operations and spectrum efficiency.
Deal activity rebounded from Q2 as Q3 included six of the top ten corporate deals year-to-date and several large private equity deals. Consumer sentiment and retail sales trends weakened and suggest R&C companies will face an increasingly challenged environment through year-end. The deal environment remains challenging, given the lack of availability of quality assets for sale and a mismatch in buyer and seller expectations around price.
Technology deals accelerated in the third quarter returning to historically high levels with deal volume doubling from the previous quarter, according to PwC’s US Q3 technology M&A Insights report released today. Private equity (PE) buyers continued to take an active role in technology M&A with increased deal closures and numerous new deals announced.
The capital markets continued to demonstrate strong momentum in the third quarter of 2013 as the volume of new public listings matched the previous quarter, and exceeded the third quarter of 2012, according to IPO Watch, a quarterly survey of IPOs listed on U.S. stock exchanges by PwC US.
This PwC quarterly publication reviews the status of global automotive deal activity among vehicle manufacturers, suppliers, financiers, and other related sectors, as well as key trends that impacted the deal market in the first half of 2013, transaction activity by sector and region, and PwC's perspective on the road ahead
The current global economic environment has posed various challenges for US investors, including private equity firms, domestic corporations, and multi-nationals. However, we expect deal activity to intensify as companies look for new ways to grow and meet their strategic objectives. In particular, the pace of US deal activity may increase as companies seek to find value and expand through mergers and acquisitions with international targets.
Deal closings can be lengthy and difficult processes with many facets to consider. The Locked Box mechanism negates the need for preparing and reviewing the final price adjustments post closing. Pricing deals this way allows the buyer/seller to put resources into other aspects of the deal.
The people aspects of integration cannot be managed in a silo apart from the rest of the effort. Aligning human capital with the integration strategy is a critical success factor for delivering deal value.
The need for effective communication is often overlooked or underestimated in the flurry of activity surrounding a deal. Executing a strong and clear communication strategy is critical to successful integration. Dealmakers have a choice; they can communicate honestly and transparently to manage speculation surrounding the transaction, or they can ignore the speculation and watch it turn into fear and confusion.
The acquisition of a business can have a significant impact on both the risk exposures and risk management strategies of the combined entity. In many cases, an acquirer’s financial risk exposure will increase as a result of the acquisition. However, there may be situations in which the acquiree’s operations reduce the acquirer’s current risk exposure. In any event, identifying potential changes in enterprise risks, creating an action plan to address them, and managing changes to risk management strategies post-acquisition are critical to developing short- and long-term solutions for integrating financial risk management considerations in an acquisition.
Companies preparing to go public often face a number of issues related to their financial statements. A common issue is whether push-down accounting should be applied. Push-down accounting is the practice of adjusting the standalone financial statements of an acquired company to reflect the basis of accounting of the buyer. This edition of Mergers & acquisitions - a snapshot, provides an overview of the SEC's rules on push-down accounting and a high-level summary of the complexities and opportunities that can arise in applying the rules to common deal structures.
Determining whether an acquired group of assets is a business has proven to be one of the more challenging aspects of applying the current M&A accounting guidance. For many transactions, the determination will be straightforward. However, the current guidance will cause many transactions that are "on the edge," and previously would have been accounted for as asset acquisitions, to be accounted for as business combinations. This edition identifies relevant considerations in determining whether a business has been acquired and why it matters not only upon acquisition but also for disposals and public company reporting.
In a business combination, buyers are required to record the acquired assets and assumed liabilities of a business at their fair values. Fair value reflects the price that market participants would receive to sell an asset or pay to transfer a liability. Assets and liabilities may be used differently by different market participants, resulting in variations in values. Therefore, a market participant's view is an important aspect of the valuation process as a buyer cannot look only to its own intended use of an asset or its ability to transfer a liability at a certain price. This publication provides insight on the identification of market participants, as well as how entities can develop market participant assumptions.
The M&A Standards changed how a parent reports the minority shareholder interests in a partially owned subsidiary in its consolidated financial statements. The minority shareholder interests, or noncontrolling interests (''NCI''), are generally presented within equity as if the parent and the minority shareholders have similar economic interests. Previously, NCI were generally presented between liabilities and equity (''mezzanine equity''). This edition focuses on the classification of redeemable NCI and how different minority shareholder rights may lead to different financial reporting by the parent.
In many M&A transactions, companies looking to dispose of non-core businesses or to generate cash may sell only a portion of their operations (e.g., a subsidiary or a business unit). As part of these transactions, a seller may need, or want, to prepare separate financial statements of the operations being sold, commonly referred to as carve-out financial statements. The preparation of these financial statements can be challenging as there is limited guidance covering their composition. This volume of Mergers & Acquisitions - A snapshot, focuses on some of the issues companies may face when preparing carve-out financial statements, how those statements may differ from their own financial statements, and how the M&A Standards may impact...
FASB Accounting Standard Codification Topic 810 incorporates FAS 167, Amendments to FASB Interpretation No. 46(R)), which is the U.S. standard on consolidation (the Consolidation Standard). The Consolidation Standard is effective as of January 1, 2010 for calendar year end companies and the impact will soon be reported in the first quarter reporting cycle. As a result of applying the new guidance, certain entities may need to be consolidated while other entities may need to be deconsolidated. Determining who consolidates is just the beginning.
In many M&A transactions, when the buyer and seller cannot agree on the total purchase price in an acquisition, the two parties agree to an additional payment, or contingent consideration, based on the outcome of future events. These payments are commonly referred to as earnouts and are typically based on revenue or earnings targets that the acquired company must meet after the acquisition date. The accounting for these arrangements under the M&A Standards represents a significant change from past practice.
In many M&A transactions, a buyer may acquire assets it does not intend to use. Prior to the M&A Standards, buyers generally would assign little or no value to assets that are not intended to be used when accounting for an M&A transaction. Now, such assets are required to be recognized at fair value from a market participant perspective, even if that perspective differs from that of the actual buyer. One common type of asset that a buyer does not intend to actively use that is receiving considerable attention is called a "defensive asset."
Accounting for partial acquisitions and disposals - it's not so simple! In an economic environment where many companies are buying and selling portions of businesses, the M&A Standards will have an impact on how companies account for these types of transactions. At first glance, the fundamental concept of "control" that drives the accounting seems easy to understand. If a company gains control, the acquisition is a business combination. If a company loses control, it deconsolidates the subsidiary. If a company maintains control, the transaction is recorded in equity. Simple, right? Not so fast!
Doing a deal? How will you compensate employees of the target? The new M&A Standards may impact your decision. Determining whether employee arrangements represent compensation for service prior to and/or after the acquisition will have a direct impact on the amount included as purchase price versus the amount expensed in the future. This installment of Mergers & Acquisitions - A snapshot explores some of the more common issues related to employee compensation arrangements typically seen in business combinations... contingent consideration, golden parachutes and stay bonuses, and exchanges of stock compensation awards. Employee compensation decisions agreed upon during deal negotiations could impact the acquirer's future financial results.
Are you ready for volatility in your effective tax rate? The new M&A standards will likely impact a company's effective tax rate. This impact will be felt by acquisitive companies in all industries, public and private, and as early as the first quarter of 2009 because parts of the new M&A standards apply to prior acquisitions. This installment of Mergers & Acquisitions—A snapshot focuses on how the accounting for merger and acquisition transactions will create volatility in an acquirer's effective tax rate in periods before and after an acquisition.
Did you know that the new M&A standards could impact your company regardless of whether you plan to close a deal? Given the current economic environment, understanding the new M&A standards may not be a priority for many companies, particularly if M&A activity is not on the horizon in the foreseeable future. However, companies should be careful not to overlook the new M&A standards, as they may have a significant impact, even without a deal. This installment of Mergers & Acquisitions - A snapshot will help you avoid last-minute surprises by understanding how the new accounting and reporting standards for M&A may affect your financial reporting even though you haven’t closed a deal.
Since the adoption of FAS 142, the goodwill impairment standard, the equity markets have generally trended upward. Accordingly, impairments may not have been as frequent as we expect to see them today. This edition of Mergers & Acquisitions - A snapshot, focuses on some of the issues companies may face in preparing goodwill impairment tests in the current environment. It also serves as a refresher on certain aspects of the framework for conducting those tests.
Recognizing that the new standards affecting mergers and acquisitions — FAS 141(R) and FAS 160 — will dramatically change the way companies negotiate and account for M&A, PwC has launched the first in a series of publications that will help companies keep abreast of emerging issues resulting from the new standards, as well as provide them with ideas on modifying current strategies and employing new ones for future deals. This first installment of Mergers & Acquisitions - A snapshot focuses on how the accounting treatment for M&A transactions will depend considerably on whether the deal closes before or after the effective date of the new standards.