Mergers – Acquisitions

Valuation for
Mergers – Acquisitions

Valuation for Mergers & acquisitions

Valuation of assets is an integral & important exercise for pre acquisition due diligence as well as purchase price allocation post merger & acquisition.

RNC provides valuation advisory services to PE funds, merchant bankers, corporates, deal advisors and other interested entities on the valuation of the tangible fixed assets forming part of the business being considered for merger or acquisition.

In an event of a Merger or Acquisition, the Acquirer company purchases the stake in the Target company by paying a consideration. This purchase price needs to be allocated to Tangible & Intangible assets. Hence, there is a need to estimate the fair value of the tangible assets. The excess of the purchase price paid over the Fair Value of the tangible assets is the value of the intangible assets or goodwill that is acquired through the transaction.

Ind AS, US GAAP (Generally accepted accounting principles) as well as IFRS (International Financial Reporting Standards) requires the purchase price allocation (PPA) to be carried out for all M&A deals.

PPA gives clarity to the stakeholders about the deal in the form of appropriate reporting of the Fair Value of assets into the books of accounts.

RNC has been a part of complex and technically challenging high value transactions and has carried out valuations for numerous cross border transactions across the globe namely Africa, America, South East Asia & Middle East. RNC has been a preferred partner for valuation of assets for Multinational firms having business interests in India and Indian Multinationals having business interests across the globe.

Valuation for transfer pricing

Increasing participation of multi-national groups in economic activities in India has given rise to new and complex issues emerging from transactions entered into between two or more enterprises belonging to the same group. Hence, there was a need to introduce a uniform and internationally accepted mechanism of determining the fair value of assets being transferred.

Transfer Pricing Regulations are applicable to all enterprises that enter into an International Transaction with an Associated Enterprise. Therefore, generally it applies to all cross border transactions between associated enterprises. The aim is to arrive at the comparable price as available to any unrelated party in open market conditions and is known as the Arm’s Length Price.

RNC has executed several complex transfer pricing assignments for various multi-national corporates.

Valuation for fairness opinions

A fairness opinion is provided by an independent financial advisor to the board of directors of selling companies in many transactions today, especially those with a significant number of minority shareholders. In cases where the transaction is considered to be material for the acquiring company, a fairness opinion is sought on its behalf also.

A fairness opinion involves a total review of a transaction. The fairness opinion is based on pricing, terms and consideration received in comparision with the market for similar assets. The advisor then opines whether the transaction is fair, from the perspective of minority shareholders.

There may be no specific guidelines as to when to obtain a fairness opinion, it is important to recognize that the directors endeavour to demonstrate that they are acting in the best interest of all the shareholders by seeking outside assurance that its actions are prudent.

RNC has been a part of several business transactions for providing independent opinion on the fairness of the pricing for several deals across sectors.