Category Archives: More on the “Science” Side

Irrational Ex-Uber-ance

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In case you missed it, there has recently been some uber-interesting valuation discourse around the blogosphere regarding Uber, the company whose smart phone app connects drivers with those wanting rides. The buzz is about Uber’s pre-money valuation, $17 billion, implicit in its latest round of financing. It all seems, shall we say, a bit aggressive for a company with an estimated $300 million in annual revenue and little if any operating income.

Most prominently in the skeptics’ corner is Aswath Damodaran, a finance professor at NYU, who recently published a detailed analysis and valuation that trimmed the Uber valuation down by about 2/3rds to $5.9 billion.

Most prominently in the advocates’ corner is a Series A investor and current board member of the company named Bill Gurley. Gurley posits an eloquent defense that Damodaran’s numbers are off by a country mile factor of 25 times and that, as the latest group of investors has freely determined, the company is worth every penny of its $17 billion valuation if not more.

There’s tons of interesting stuff and debatable points in both of these analyses (the impending doom of the world’s “car ownership culture”?!?), but, to me, the heart of the issue is something both gentlemen are calling “disruption” aka category-killing. Effectively, Gurley says that Damodaran is missing the boat because he doesn’t understand that Uber is in the process of killing off multiple categories at once and, because of this, the TAM (Total Available Market) is bigger, by orders of magnitude, than Damodaran has considered. Check out this little historical I-told-you-so gem cited by Gurley:

“In 1980, McKinsey & Company was commissioned by AT&T (whose Bell Labs had invented cellular telephony) to forecast cell phone penetration in the U.S. by 2000. The consultant’s prediction, 900,000 subscribers, was less than 1% of the actual figure, 109 Million. Based on this legendary mistake, AT&T decided there was not much future to these toys. A decade later, to rejoin the cellular market, AT&T had to acquire McCaw Cellular for $12.6 Billion. By 2011, the number of subscribers worldwide had surpassed 5 Billion and cellular communication had become an unprecedented technological revolution.”

Damodaran, for his part, says the divergence between his narrative and Bill Gurley’s lies broadly in how their valuations address the “probable”, the “plausible”, and, for good measure, the “possible”.

So where do I stand on Uber’s valuation? I confess to a certain amount of fence-straddling in this particular situation. I know and expect that there are measures of both art and science in any valuation. I stand with Damodaran in trying to factually dissect and understand what is driving this frothy valuation. I stand with Gurley in promulgating huge, radical ideas that break down barriers and ultimately change the world. The verdict awaits.

Posted by: Mory Watkins

Inside/Outside

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As I’ve said before, taxes and tax attributes play a major role in M&A negotiations. Recall that, unfortunately, deal structuring is usually a zero-sum game, and a deal structure that favors one party tax-wise is usually to the other party’s detriment. An easy way to consider the tax consequences of different deal structures is to use a simplified inside/outside tax basis framework.

First though, a small refresher on tax basis and gains. The tax basis of assets is usually analogous to the book or accounting value of assets except where it has diverged over time due to depreciation or amortization methodologies. A gain occurs on the difference between the purchase price and the tax basis (a loss occurs if the tax basis exceeds the purchase price). Lots of additional factors effect the size and nature of a gain – ordinary or capital gain, the tax status of seller, holding period, tax rate, etc.

Now to the inside versus outside tax basis framework. Inside basis refers to the basis a company has in its own assets. Outside basis is the basis that a shareholder has in the shares of another company. Deal structure will dictate how the inside and outside gains or losses occur.

Deals are structured as either asset or stock deals:

  • In a taxable asset deal, the seller is taxed on its inside asset basis and its shareholders are taxed on the gains of these sales proceeds. This is two levels of tax. The purchaser of the assets acquires a stepped up (fair value) basis in the assets and the new, greater depreciation and amortization are tax deductible.
  • In a taxable stock deal, seller shareholders are taxed on their outside basis in the seller’s stock (only); there is no tax liability incurred in connection with the assets. This is one level of tax. The purchaser gets a stepped up (fair value) basis in the stock and a carry-over basis in the assets.

That’s it. There is a special case to be considered when the acquisition target is a corporate subsidiary and is at least 80% owned by its parent. In this case, the target can sell assets and distribute their proceeds to the parent shareholders without actually incurring a 2nd layer of tax (because, technically, the distribution of proceeds should qualify as a tax-free liquidation). In deals like this, the main consideration is the difference between inside and outside bases.

Also, there are several tax-free structures where the major determinant is the form of consideration paid by the buyer (cash or stock) rather than the structure (asset or stock). Essentially, if around 50% of the purchase price is paid in stock of the purchaser the deal may be tax-free because deals that use an abundance of buyer stock can qualify as “reorganizations”.

For a more detailed approach to tax repercussions of different deal structures, go to my prior blog posting here.

Deals are often scuttled due to tax considerations and, more specifically, failure to account for a deal structure’s impact on the sellers’ after tax proceeds. Understand the inside/outside tax bases, analyze, and win more deals.

Posted by: Mory Watkins

M&A Tax Checklist

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After valuation, one of the most important negotiated numbers in an M&A transaction is tax. Tax in corporate M&A is pretty much a “zero-sum” game — tax impact from a deal structure that is tax-beneficial to the seller will usually be tax-adverse to the buyer, and vice versa.

Today, I’m going to offer up a concise M&A tax planning checklist. The basic idea here is to gather the info and run the numbers to analyze both the present and future tax effects of each deal structure under consideration; that is, a) the immediate taxes associated with the acquisition, and b) the future taxes and benefits associated with realizable basis step-ups, NOL carryovers, and so forth over time. Both present and future details must be analyzed for all deal structures. Only then can a negotiation ensue where buyer and seller compare figures and divide up perceived costs and benefits…ideally, equitably.

If you’re a competent financial modeler, you can easily do your own back of the envelope tax analyses. You can find a good explanation of NOLs and a template to run different transaction scenarios here. A tax professional is needed, of course, to crunch the definitive numbers.*

Here is the information you’ll need to run your analyses:

  1. Stock and asset basis
  2. Seller plans for proceeds (i.e., “individual shareholders to receive proceeds and hold purchaser stock for negotiated period”, etc.)
  3. Applicable tax rates for all parties (target, target shareholders, purchaser)
  4. Depreciation and amortization schedules for acquired assets
  5. Tax status of sellers (suspended losses, special tax status, relevant estate planning considerations, etc.)
  6. Management participation and compensation related to deal structure (if any)
  7. Planned asset dispositions (if any)
  8. Available target NOLs and other loss/credit carryovers
  9. Purchaser NOLs (may limit target gains)
  10. Availability and timing of taxable income vis a vis applicable deductions/loss carryovers

Understanding tax implications of deal structures from the seller’s perspective frequently means the difference between closing and not closing a strategic acquisition. Use this checklist and methodology to balance your motivations with your seller’s chief concern and goal: maximizing after tax proceeds from selling the business.

Posted by: Mory Watkins

*This posting doesn’t constitute tax advice; always seek tax guidance from a tax professional.

Earnouts (Part Two)

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Some while ago, I posted about earnouts and how a quarter of all business acquisitions have an earnout component in one form or another. I examined the difficulty of creating a good earnout, and I offered up a couple choice pieces of advice.

Today, I’d like to take another look at earnouts, but this time concentrating more on seller implications. Sellers aren’t always rational during the sales process, but for the most part they are dialed into concerns related to the after-tax proceeds from the sale of their business. It gets a little trickier than you might think when the sale involves earnouts, so both buyer and seller would do well to understand the fundamentals of earnout tax considerations*.

The best way to think of an earnout is that it is a type of “installment” sale, but with contingent payments (I’ll get to the latter part in a moment). An installment sale is a sale in which at least one payment will be received after the close of the taxable year in which the sale occurs. The key feature of an installment sale is, of course, that it essentially recognizes taxable gain as payments are received, rather than all at once in the year of disposition. Loss of installment sale status accelerates tax payments so that tax may even be due before the actual cash is collected (note that the installment method will automatically apply by default unless the seller elects out).

Okay, special installment rules apply where there is a contingent payment (i.e., earnout) that occurs as part of the sale because the aggregate selling price cannot be determined by the close of the taxable year in which the sale occurs. The tax man will determine which of three categories the sale falls under — 1) a sale with a stated maximum selling price, 2) a sale with a fixed period, or 3) a sale with neither a stated maximum selling price nor a fixed period:

  • A sale with a stated maximum selling price will assume that all contingencies are met such that it maximizes the payments to the seller and accelerates payments to the earliest date or dates under the purchase agreement.
  • For a sale where the maximum selling price cannot be determined but the maximum period over which payments may be received can, the seller has to recover the basis ratably over that period. Then, if the actual payment received is less than the amount of basis that should be recovered, the taxpayer usually doesn’t recognize a loss, but instead the excess is carried forward (and the loss may be recognized in the final year).
  • For a sale with neither a stated maximum selling price nor a fixed period, the IRS will closely scrutinize whether a sale has actually occurred (the seller may be just receiving rent or royalties). If a sale is deemed to have occurred, the seller usually must recover his basis in equal annual installments over a period of 15 years.

Lastly, three common situations to watch out for…

  1. In cases where the earnout numbers get kind of crazy (very large contingent payments that are “difficult” to achieve), be aware that the maximum selling price rules above can both accelerate recognition of and change the timing and nature of gains.
  2. In cases where the earnout numbers get “lumpy” (an earnout gain is recognized in early years, but little or no earnout gain is earned later), the seller may be ultimately left with a large capital loss that can be hard to deduct.
  3. Stock sales with a Section 338(h)(10) election that include an earnout deserve special consideration due to a common trap that results in excess gain recognition in the year of sale.

Buyers and sellers are increasingly using earnouts to bridge the valuation gap and get deals done. Becoming more aware of seller-side tax treatment of earnout arrangements can help strategic buyers inject additional value into transactions.

Posted by: Mory Watkins

*This posting doesn’t constitute tax advice; always seek tax guidance from a tax professional.

When 3,678 Isn’t 5,000…

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Did you know that now there are only about half as many publicly traded companies as there were in 2000? I didn’t.

The number of publicly traded companies always ebbs and flows, but the current number has fallen steadily since 2000. At 3,678, the number of companies available for the public to invest in is much closer to the all time low of 3,069 in February 1971 than to the all time high of 7,562 in July 1998. Granted, there are thousands of stocks traded on “Pink Sheets” and other lightly or unregulated markets, but the Wilshire 5000, which only includes those that trade on an exchange such as the New York Stock Exchange or Nasdaq, can’t even maintain enough companies to reach its namesake number of 5,000. There are now only 3,678 companies in the index, which is down by more than a third in a decade, and off by nearly half from its level in 2000.

But it’s not just a blip with the Wilshire 5000. The total number of listed securities trading on the Nasdaq OMX and NYSE Euronext exchanges was 4,916, according to the World Federation of Exchanges. The number of listed securities on these two critical exchanges has fallen every year since 2009 and is down 32% since 2000 and 39% from the recent peak in 1997.

Why is this? One of the main reasons cited is that corporate acquisitions have eliminated and absorbed scores upon scores of candidate companies. Even during the recession years of 2008 and 2009, 8,778 and 7,415 U.S. companies, respectively, were bought. Those figures have steadily increased to 10,108, 10,518 and 12,194 in 2010, 2011 and 2012, respectively, due to a combination of cheap acquisition debt and relatively lower acquisition multiples during the last three years.

Other hypotheses include the increasing expense/hassle of being public, the prevalence and domination of larger public companies, investor distrust of stocks, and involuntary delisting. There is little new supply of public companies either, of course, as the initial public offering market remains moribund.

No one can say for certain exactly why the number of tradable equities has fallen so precipitously, but the trend for fewer rather than more public companies should continue for the foreseeable future.

Posted by: Mory Watkins; excerpted, in part, from an article recently written by financial reporter Matt Krantz.

Due Diligence – How to Avoid Financial “Shenanigans”

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It’s an unfortunate fact of life that there are people out there willing to bend the rules of accounting in order to maintain the illusion of profitability on paper. My posting today discusses how to avoid becoming a victim of accounting gimmicks and financial trickery when evaluating an M&A target.

As I’ve previously discussed, fully understanding a target’s cash flow is the name of the game in corporate M&A. Easier said than done. Components of cash flow come from all areas of the financial statements and encompass the full spectrum of business operations. How then does one go about breaking down and evaluating the veracity of cash flow?

Start by understanding that some of the most important cash flow information comes from the profit and loss statement. Just to state the obvious, if you have a high degree of confidence in a company’s (book) accounting earnings, you’re well ahead of the game in determining the overall truthfulness and reliability of cash flow.

Okay, but how then do you best evaluate whether someone’s cooking the books or playing games with the P&L? Answer: all earnings-related accounting fraud falls into one of just seven categories. Hard to believe, but true. Understand, recognize, and watch out for these seven financial slights-of-hand and you’ll never be fooled.

This nifty idea comes from a book that I consider to be the seminal work on the subject of fraudulent financial statement analysis – Financial Shenanigans (How to Detect Accounting Gimmicks and Fraud in Financial Reports) by Howard Schilit. I’ll come right out and say it: I absolutely love this book. I was first exposed to it back in business school during an early accounting course. Over the course of my career, I’ve come to rely on it as my go-to reference for spotting and diagnosing accounting issues in the companies I buy. The essential elegance of Financial Shenanigans is that it reduces the seemingly limitless ways of fraudulently manipulating accounting earnings into just a couple principles that are easy to remember and use on an every day basis. Moreover, the book illustrates each of the principles with memorable real life corporate vignettes and examples.

Here are the seven types of accounting shenanigans:

  1. Recording revenue too soon
  2. Recording bogus revenue
  3. Boosting income with one-time gains
  4. Shifting current expenses to a later or earlier period
  5. Failing to disclose all liabilities
  6. Shifting current income to a later period
  7. Shifting future expenses into the current period

And these seven shenanigans can be further reduced to just two fundamental tricks: boosting current profits (numbers 1 through 5) and shifting current profits into future periods (numbers 6 and 7).

This book and its classifications of accounting tricks offers a comprehensive framework for evaluating the real quality of a prospective M&A target’s P&L. Are they too aggressive with revenue recognition issues? Have they recorded unusual or one-time gains on exchanges of assets? Have they properly capitalized certain costs? Have they reasonably accrued for expected and contingent liabilities? Have they set up accurate sales reserves for unearned revenues? The list, and the potential for shenanigans, goes on and on and on…

Common sense is and will always be, of course, your best bet for avoiding being taken by an accounting scam. But remember and use the framework proposed by Schilit in Financial Shenanigans during your financial due diligence. In my opinion, there is no better or easier to use system for heading off “creative” accounting issues that could really crater your acquisition.

Posted by: Mory Watkins

Minority Interests

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Over the years, I’ve seen some pretty shrewd minority deals done. A minority interest can be a less risky, more efficient, and cheaper means of making an acquisition than a controlling interest, particularly when they are negotiated in conjunction with an option to purchase a controlling stake later. Corporate investors often acquire minority interests in companies for exactly the same strategic and economic reasons they acquire controlling interests — access to new products, markets, technology, people, etc. Today I’ll touch on some of the valuation theory and accounting I consider during the acquisition of minority interests.

The valuation and related analyses for a minority interest acquisition are virtually the same as for acquiring the whole entity, except calculations are pro rata, of course. The same methodologies also apply when analyzing accretion/dilution (keeping in mind that balance sheet and P&L treatments may differ according to how much of the target is acquired and whether “control” is established).

Don’t forget, however, that when making a minority investment two important valuation discounts apply:

Discount for Lack of Control: Since minority ownership interests at less than 51% often lack sufficient voting power to control operations, minority shares are inherently less valuable than controlling interests. Minority interests will be valued at significantly less than their pro rata proportion of the entire business. A good rule of thumb is that the average discount for lack of control is about 30 percent less than the value of controlling shares.

Discount for Lack of Marketability: If the minority investment is in a private company, an additional issue is raised. An ownership interest in a business is always worth more if it can be easily sold than if it cannot, and lack of marketability must also be factored into determining the value of a minority interest. A good rule of thumb is that the value of private minority shares should be reduced by an additional 30 to 50 percent relative to the value of controlling shares.

In regards to accounting treatment, a corporate acquirer must account for its minority ownership interest via the cost, the equity, or the acquisition method. The choice of method depends upon how much the acquiring company owns and whether it has control:

If the acquirer owns less than 20 percent of another company’s stock, it uses the cost method for the investment. If it owns between 20 percent and 50 percent, it uses the equity method. These two methods, however, do not lead to actually consolidating the financial statements.

When the acquirer owns over 50 percent of another company, it uses the acquisition method and must consolidate the financial statements. When consolidating, the subsidiary’s equity accounts are eliminated, a non-controlling interest account is created (if it is non-control), the subsidiary’s balance sheet accounts are adjusted to FMV, and goodwill is recognized.

So, minority interests have a lot of positives, but you’ve got to be mindful of (and price in) the associated lack of control and the illiquid nature of minority interests. You also must understand that the accounting presentation (and therefore the accretion/dilution properties) of a minority interest investment will vary according to ownership level and influence.

Posted by: Mory Watkins

Accretion Shortcuts

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Today, a brief posting about shortcuts and practical rules of thumb for figuring out whether a prospective transaction might be accretive or not.

I’ll go ahead and give my caveat emptor right now — these shortcuts are only useful when there’s one type or source of consideration. Well, they can also be used to run sensitivity analysis to establish the relation between accretion/dilution and different types of consideration — but whenever a deal has a mix of consideration, you must follow the complete  analytical process I’ve already described in previous postings (and again summarized below).

So, recall that there are three major ways to pay for a target, each with its own effect on EPS:

  • Cash: foregone interest
  • Debt: new interest paid
  • Stock: dilution due to new shares issued

An All Cash Deal is likely to be accretive if the foregone interest expense is less than the seller’s pre-tax income.  Foregone interest expense may be calculated by multiplying the cash investment rate times the purchase price.

An All Debt Deal is likely to be accretive if the new debt interest expense is less than the seller’s pre-tax income.  New debt interest expense may be calculated by multiplying the interest rate times the new debt (very much the same concept as the All Cash Deal).

An All Stock Deal is likely to be accretive if the buyer has a higher PE ratio than the seller. Here, the buyer is effectively buying “cheaper” earnings.

These methods use differences in consideration to project whether you’re likely to be getting more than you’re paying, all other things being equal.

Unfortunately, there is no shortcut for analyzing accretion if consideration is a mix. You must go through the whole process as described in previous postings:

  • Calculate the EPS effect of each part of consideration (foregone interest, new interest paid, new shares issued);
  • Combine the P&Ls and estimate revenue and cost synergies;
  • Combine the balance sheets and allocate the purchase premium;
  • Step up PPE and expense the projected new depreciation;
  • Write up Intangibles and expense the projected new amortization;
  • Calculate new DTLs.

Done carefully and correctly, this process provides a reasonable preliminary accretion analysis.

Next time, I’ll discuss some of the theory and accounting behind the acquisition of a minority interest.

Posted by: Mory Watkins

Earnouts (Part One)

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Earnouts are an increasingly popular technique in middle market M&A transactions primarily because they permit buyers and sellers to creatively bridge price disagreements. According to Houlihan Lokey, about a quarter of all M&A deals now include an earnout, and the median earnout amount (as a percentage of purchase price) is 10%.

Over the course of my career, I’ve used (and played referee on) numerous earnouts – particularly during some of the roll-up and aggregation work that I’ve done. Today, I thought I’d share a couple general thoughts on best practices for earnouts in Part One of this posting, and then later examine earnouts from the tax perspective in Part Two.

To be clear, an earnout is a form of contingent consideration (other examples are escrows, holdbacks, and closing date balance sheet or working capital adjustments) where a portion of the purchase price is contingent on the future financial performance of the target business. Payment can be contingent on a future milestone event, such as acquisition of new clients or product launches, or, more typically, contingent on exceeding a specified financial target such as gross revenue, net income, or EBIDTA.

Earnouts can be very tricky…you have to anticipate buyer and seller incentives for “gaming” the system, and anticipate changing business conditions and contingencies too. Will the seller stay involved in the business to ensure that the earnout is earned? Will the buyer give assurances that financial resources, such as working capital, will be available to earn the earnout? Will the seller have the right to manage the business as they see fit? Will the buyer have the right to allocate overhead to reduce net income? What method of accounting will be used? Will accounting be consistent with the target’s past practices or with the buyer’s practices? If the earnout target is based on EBIDTA, will expenses be deferred to maximize the sales price? These are just a few of the most basic considerations.

Let me say it loud and clear: there is no such thing as a perfect earnout…but there are a couple pieces of solid advice I can offer to buyers and M&A professionals that may avoid headaches down the road. Here’s a short checklist:

All earnouts should broadly address three topics:

  1. Who controls the post-closing entity;
  2. How the business will be run, post-closing (i.e., as done previously, or perhaps according to new buyer methodology);
  3. The method of accounting for profits, losses and expenses.

All earnouts should have details and specifics regarding:

  1. The relevant performance metrics or milestones;
  2. The timeframe for achieving the earnout;
  3. The process/mechanism for determining payment;
  4. The process/mechanism for disputing payment;
  5. Treatment of certain extraordinary and one-time events;

Lastly, two important pieces of advice:

  • Don’t rely too much on GAAP as a basis for running the numbers – it is fraught with subjective areas and will inevitably lead to disagreements and problems. Instead,…
  • Do attach a sample schedule with a sample earnout computation. An example, like a picture, is worth a thousand words.

Next time, I’ll delve into the basic tax implications of earnouts.

Posted by: Mory Watkins

Combining Balance Sheets

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Last time I discussed how P&Ls are combined in M&A transactions and the effect of synergies, changes in the mix of consideration, and balance sheet write-ups on accretion (or dilution).

Today, I’m going to turn to the balance sheets. I’ve already mentioned two of the most important balance sheet changes last time – the write-ups for PPE and Intangibles. Here, I’ll tick down the key balance sheet accounts and touch on some of the combining adjustments.

In combining the balance sheets, I must also address purchase price allocation. I’m not going to go into mind-numbing detail; that’s beyond the scope of discussion here (and actual purchase price allocation should be left to CPAs, tax experts, etc.). In broad strokes, the amount of the purchase price paid in excess of the target company’s accounting value must be recorded on the acquirer’s balance sheet. Accounting conventions require that the purchaser first allocate to tangible assets and then to intangible assets. Any amount that cannot be allocated to identifiable assets is recognized as goodwill. Goodwill therefore represents the excess of purchase price over the fair market value (FMV).

Here is my time tested “quick & dirty” method for combining and allocating purchase price to the key balance sheet accounts. Using this process should give you enough rough approximations of opening combined balance sheet figures for preliminary analysis:

Cash: The combined cash balance of buyer and target is reduced by any cash used in the purchase price.

Short Term Assets/Liabilities: No initial adjustments needed; however, future write-off of A/R or changes in accruals may be necessary.

PPE: As previously discussed, the seller’s fixed assets (PPE) are revalued at the time of the deal and are almost always worth more than the carried book value. The incremental value is added to the balance sheet. The resulting incremental depreciation will lower book earnings and may result in the creation of a deferred tax liability (DTL).

Other Intangibles: Like PPE, intangibles are examined and revalued at the time of the transaction. In most cases the intangibles will go up, resulting in incremental amortization that will lower book earnings. This additional amortization is usually not tax-deductible, so a DTL is created. Regarding purchase price allocation, the purchaser must first allocate identifiable intangibles such as trademarks, patents, and other intellectual property. Any amount that cannot be allocated to identifiable assets is recognized as goodwill.

Goodwill: In merger models, the prevailing convention is to zero out existing goodwill on the target’s balance sheet (the new transaction refreshes goodwill and old goodwill is forgotten). New goodwill is calculated by taking the allocable purchase premium less the write-ups for PPE and Intangibles (mentioned above) and also subtracting the net of the write-off of existing DTL and new DTLs created by the PPE and Intangible write-ups.  Goodwill is assumed to last forever on the balance sheet unless there’s an impairment. There is no tax impact for goodwill unless there’s a write-down.

Long Term Debt: Add any new debt issued for the acquisition.

Deferred Tax Liability (DTL): In merger models, the common convention is that existing DTL on the seller’s Balance Sheet is written off at the time of the transaction regardless of the structure of the deal (stock, asset, or 338(h)(10)). Any new DTL will be calculated from the acquirer’s perspective in the future. As discussed above, write-ups for PPE and Intangibles may create new DTLs related to the transaction. The new DTL obligation may be estimated by applying the acquirer’s tax rate to the sum of the PPE and Intangibles write-ups.

Shareholder Equity: In merger models, the common convention is to zero out seller equity and add the APIC of the buyer’s stock. The shareholder’s equity section of the target’s balance sheet is not transferred; instead, goodwill is created on the consolidated balance sheet to represent the difference between the purchase price and book value of net assets acquired.

So that completes the merger of major balance sheet items. Using this method will provide good, quick insight into the combined entity’s opening balance sheet.

Next time, I’ll go over a couple useful shortcuts and rules of thumb for telling right away whether a prospective transaction will be accretive or not.

Posted by: Mory Watkins