Eton Venture Services offers precise, unbiased, and independent purchase price allocation valuations for post-M&A financial reporting compliance.
A valuation expert plays a critical role in the PPA process by helping identify and value the acquired company's tangible and intangible assets and liabilities. You can trust Eton’s expertise in various valuation techniques and deep understanding of accounting standards enabling us to provide accurate and defensible allocations, ensuring compliance with regulatory requirements and reducing the risk of financial restatements.
We have established best practices for valuation procedures specific to diverse portfolios. Our team takes the time to understand the intricacies associated with each engagement, ensuring a tailored approach that meets your unique needs.
Our experts understand the complexity of purchase price allocation, and have a proven track record in helping clients gain confidence in their fair value reporting. Our experience across various business valuation services powers our ability to offer comprehensive and defensible purchase price allocation services.
Founded by securities lawyers from top law schools / law firms and staffed with finance professionals trained by the Big Four and other prominent financial services firms, Eton brings intellectual and quantitative rigor unmatched by others.
Purchase price allocation is the process of assigning the purchase price of acquiring a company to its individual assets and liabilities.
When one company buys another, the total purchase price needs to be distributed among the acquired company’s tangible assets (like equipment and inventory) and intangible assets (such as patents, trademarks, and customer relationships).
This allocation is crucial for financial reporting purposes, ensuring that the acquirer’s balance sheet accurately reflects the value of what was purchased.
We also wrote this complete guide on purchase price allocation so you can understand more about the topic.
The PPA process starts with determining the total consideration paid for the acquisition, which may include cash, stock, debt, or other forms of payment.
Next, the fair market value of the acquired company’s assets and liabilities is determined, with any residual amount allocated to goodwill.
The allocation is based on the estimated useful life and relative value of each asset and liability, which can impact the acquirer’s depreciation, amortization, and tax reporting.
We listed out the detailed steps involved in this purchase price allocation guide.
A Purchase Price Allocation (PPA) affects the income statement mainly through two ways:
Amortization: Intangible assets identified in the acquisition, like customer relationships, are gradually expensed over time. This reduces the company’s reported profit each period.
Impairment Charges: If any acquired assets lose value over time, the company might need to record impairment charges. This reduces reported profits in the period it’s recognized.
These adjustments ensure that the income statement accurately reflects the costs associated with acquiring and using assets over time.