Any finance textbook will tell us that many, perhaps the majority of acquisitions fail. Failure is defined as the acquirer’s inability to recover economic value at least equal to the purchase price. Accurate analysis of acquisition outcomes is often complex. US GAAP addresses the issue by providing investors with: • intangible asset amortization as
Fair value is the amount for which a note could be bought or sold in a transaction between willing parties. The price represents a distillation of historical and expected charge-offs, prepayments, market risks, liquidity and required investor returns. Most consumer loans are not traded, thus accurate portfolio valuation relies on modeling informed by observed loan
Purchase accounting requires allocation of the purchase price among acquired assets on a fair value basis. The process is referred to as purchase price allocation (PPA) and it relies heavily on the valuation of acquired assets, mostly intangibles. PPA benchmarking is popular in assessing the reasonableness of any given PPA by comparing it with similar
Sorbus Advisors LLC studied purchase price allocations in biopharmaceutical industry titled “Valuation of Goodwill and Intangibles in 2015 BioPharmaceutical Transactions.” The study focused on recognition, valuation, and determination of useful lives of pertinent intangible assets, contingent considerations and goodwill. While no two acquisitions are the same, common themes in the valuation of intangibles and goodwill
An employee stands to receive bigger payout when his/her stock options have a lower exercise price, i.e. stock options are cheap. At the same time, a lower exercise price may signal lower value of the option itself. On the grant date, the stock option recipient should focus on value, and not the amount of potential payout.
This article was written in collaboration with James Lecher, CEP with 718 Valuations LLC. Relative Total Shareholder Return (“TSR”) Awards are very popular, utilized by over 49% of S&P 500 companies in 2014. These plans are attractive because they align total compensation with the company’s stock price performance relative to that of its peers. Under Relative
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