Förvärvsanalys

Acquisition analysis – purchase of Group companies

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Acquisition analysis is one of the cornerstones of consolidated financial statements, which is why it is important that it is carried out correctly and recorded correctly.

The primary purpose of the acquisition analysis is to identify any excess values or goodwill.

Acquisition analysis shall be carried out when the parent company acquires shares in another company and acquires a controlling influence.

It goes through what liabilities and assets were in the acquired company at the time of acquisition. In the acquisition analysis, the acquisition price is reconciled against the adjusted equity (assets minus liabilities) of the acquired company.

The acquisition analysis is prepared by the parent company. The requirement for acquisition analysis is regulated in the Annual Accounts Act (1999:1554) in Chapter 7

Cost

The cost of the units in the acquired enterprise is the amount in cash paid or the fair value at the time of the transaction of another form of purchase price.

At the time of acquisition, shares in a group company shall be taken up to an amount equal to the expenses of the acquisition of the asset.

For the purpose of assessing the cost of acquisition, certain expenses must also be included, such as consulting fees, sales tax and commissions, etc.

The cost is recorded in the parent company’s balance sheet. This should then be eliminated in the consolidated financial statements.

How Goodwill Arises
goodwill-figur

Acquisition analysis - with examples

When a parent company buys another company, an acquisition analysis is made in whole or in part as a basis for the value of the shares. It is common for the value of the subsidiary’s equity to differ by the cost of the shares. You then get a positive difference amount / goodwill or a negative difference amount / goodwill.

Goodwill and excess values

How Goodwill Arises

If the equity of the acquired company is less than the acquisition price, Goodwill arises.

If you buy a company for SEK 1,000 million, and the subsidiary’s equity is SEK 800 million, then goodwill of SEK 200 million arises.

In consolidation, the acquisition is eliminated based on the acquisition analysis. The acquisition price is eliminated against equity, goodwill and any excess values.

Goodwill is normally written off in 5 years.

Overvalues

There may be surplus values in the acquired company, which reduces Goodwill. Overvalues just like goodwill should be written off.

If there are excess values, deferred tax liability also needs to be handled in the acquisition elimination.

Possible errors in the acquisition analysis

Should you miscalculate in connection with the acquisition analysis, there is the possibility of correction for a limited period. Listed companies have three months to adjust their acquisition analysis. Groups that apply K3 have the opportunity to correct the consolidated financial statements for 12 months.

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