Buisness combination

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Buisness combination

  1. 1. BUSINESSCOMBINATIONS 1
  2. 2. A business combination is bringing together two or morePreviously separate companies under Common control.Control over a company gained by acquiring a majority of he companys voting shares or by acquiring the net assetsof the other company. 2
  3. 3. Types of Business Combinations (a) MergerA Company A CompanyB Company 3
  4. 4. Types of Business Combinations (b) ConsolidationA Company C CompanyB Company 4
  5. 5. Types of Business Combinations (c) Stock AcquisitionA Company A CompanyB Company B Company 5
  6. 6. ABOUT KEANE INC:- ( THE ACQUIRINGCOMPANY)Industrial classification (services-Computer Program)Keane is one of the world great informationtechnology services firms. In business since1965, 50 offices in USA, Canada, and UK,Keane helps his clients leverage technology tooptimize business performance through useand management of information technology. Keane has more than 8,200 employees and 6
  7. 7. ABOUT METRO :-( THE ACQUIREDCOMPANY)Industrial classification (services-computerprogram)Metro Information services, Inc. provides awide range of IT consulting and customsoftware development services. Servicesoffered by metro include application systemdevelopment, IT engineering, systemsconsulting, project outsourcing and generalsupport services. 7
  8. 8. KEANE ACQUISITION OF METRO INFORMATIONSERVICEKeane acquired all the voting shares of metro in astock-for-stock transaction, accounted for using thepurchase method.Total Purchase Price US$ 162Million, Includingassumption of debt. 8
  9. 9. 15,978,804 sharesMetro shareholders 7,669,826 shares BUYER (0.48) Stock-for-stock TARGET Transaction 9
  10. 10. Metro Keane shareholders shareholders Ownership percentage after Merger:Keane stockholders 90.2%Metro stockholders 9.8% As a result ofstock transaction 10
  11. 11. The total cost of the merger was $162,449 determined as follows ( in thousands):- Fair value of Keane shares issued to Metro shareholdersIn exchange for their surrendered stock…………………$ 141,58Fair value of options exchanged……………………………$6,754 of financial advisory,Legal & accounting fees…..Cost$8,500Transaction bounses paid to some of metro officers ….$5,610TOTAL………………………………………………………$162,449 11
  12. 12. Allocation of Cost of the acquired Company  Under the Purchase method of accounting for business combinations, the cost of the acquired company must be allocated to the assets acquired and liabilities assumed based on their estimated fair market values on the date of combination.  Any excess of the total costs over the Net assets of the acquired company is assigned to Intangible assets if any and to goodwill.12
  13. 13. Based upon the valuation of tangible and intangibleassets acquired and liabilities assumed, keane hasallocated the total cost of the merger to the netassets of Metro as follows:-(in thousands)Net tangible assets…………………………………$(37,984)Net Intangible assets………………………………$46,100Goodwill…………………………………………… ....$154,333TOTAL$162,449 13
  14. 14. The following table presents the amounts assigned by keane Inc. toeach of the major assets and Liabilities acquired of Metro atacquisition date:-( in thousands) Cash $622 Accounts receivable $40,810 Other current assets $1,004 Property, plant & equipment,net $2,790 TOTAL ASSETS$45,226 (A) Accounts payable $3,583 Accrued compensation $9,800 Other liabilities $3,889 Note payable$65,938 Total Current liabilities $83,210 (B) 14
  15. 15. Accounting after acquisition Under the purchase Method of accounting for a business combination, the acquiring company adds to its balance sheet the assets acquired and the liabilities assumed, and reduces its cash account or increases its equity account to reflect the surrendered resources. 15
  16. 16. KEANE INC. BALANCE SHEET(in thousands) Before merger Acquired assets After merger & liabilitiesNet current assets 313,614 + 42,436 = 356,050Fixed tangible assets 43,053 + 2,790 = 45,843Intangible assets 43,819 + 46,100 = 89,919Goodwill 71,984 + 154,333 = 226,317Total assets 472,470 718,129Liabilities 75,858 + 83,210 = 159,068Capital stock 118,321 + 148,339 = 266,660Deferred merger cost + 14,110 = 14 ,110Retained earnings 278,291 278,291Total 472470 16 718,129
  17. 17. THE END 17

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