- Joined
- 9/29/12
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Hello All,
I would like to ask some help regarding one technical aspect of merger: when combining balance sheet and using purchase accounting method additional goodwill needs to be calculated according to formula offered price x outstanding shares - book value of equity. My first thought was to use price which I calculated from DCF of target, but then I realized that this is not fully correct price which acquirer can offer because it does not include synergies which are calculated according to formula PV(merged company)-PV(acquirer)-PV(target), this implies that combination of balance sheets for merged company should come before the calculation of offer price with synergies, because first balance sheets need to be combined to make DCF of merged entity. So here appears a circle: price with synergies is needed to combine balance sheets, but this price can only be calculated in the very end after balance sheets are combined. What could You suggest? P.S. I am not allowed to use pooling method.
Thank You in advance!
I would like to ask some help regarding one technical aspect of merger: when combining balance sheet and using purchase accounting method additional goodwill needs to be calculated according to formula offered price x outstanding shares - book value of equity. My first thought was to use price which I calculated from DCF of target, but then I realized that this is not fully correct price which acquirer can offer because it does not include synergies which are calculated according to formula PV(merged company)-PV(acquirer)-PV(target), this implies that combination of balance sheets for merged company should come before the calculation of offer price with synergies, because first balance sheets need to be combined to make DCF of merged entity. So here appears a circle: price with synergies is needed to combine balance sheets, but this price can only be calculated in the very end after balance sheets are combined. What could You suggest? P.S. I am not allowed to use pooling method.
Thank You in advance!