Professional Documents
Culture Documents
Business
Combinations
McGrawHill/Irwin
TheMcGrawHillCompanies,Inc.2006
of Business Combinations.
Reasons for the popularity of business
combinations.
Techniques for arranging a business
combination.
The accounting method for business
combinations.
2
Definitions
According
Definitions
B u s in e s s C o m b in a t io n s
F r ie n d ly T a k e o v e r
5
H o s t ile T a k e o v e r
Friendly Takeovers
Board
Hostile Takeovers
Target
Repellent: An acquisition of
substantial amounts of outstanding
common stock for the treasury or for
retirement, or the incurring of substantial
long-term debt in exchange for
outstanding common stock.
Business Combinations:
Why And How?
In
11
Business Combinations:
Why And How?
The
12
Business Combinations:
Why And How?
Achieving
A combination involving
enterprises in the same industry.
Vertical: A Combination involving an enterprise
and its customers or suppliers.
Conglomerate: A combination between
enterprises in unrelated industries or markets.
14
Merger
Statutory Consolidation
Acquisition of Common Stock
Acquisition of Assets
15
Statutory Merger
It
Statutory Merger
Stockholders
of all constituent
companies must approve the terms of
the merger.
Some states require approval by a twothirds majority of stockholders, thus
acquiring ownership of those
corporations.
17
Statutory Merger
Company
Statutory Consolidation
19
20
Acquisition of Assets
25
27
28
Amount of Consideration
This
29
31
Contingent Consideration
Contingent
32
Contingent Consideration
Contingent
34
35
36
37
38
In a business combination, leases of the combineelessee are classified by the combined enterprise as
they were by the combinee unless the provisions of
the lease are modified to the extent it must be
considered a new lease.
Unmodified capital leases of the combinee are
treated as capital leases by the combined
enterprise, and the leased property and related
liability are recognized in accordance with the
guidelines of FASB statement No. 141.
39
Goodwill
Goodwill
Negative Goodwill
In
41
Negative Goodwill
42
Negative Goodwill
Excess
43