VALUE ACCRETION/DILUTION IN BUSINESS

COMBINATIONS: AN INTEGRATED PERSPECTIVE

ABSTRACT
This armchair caselet is an attempt to offer an integrated perspective of Business Combination
that is anchored on Accounting of Business Combination.
While topics such as Construction of Financial Statement Forecasts, M&A financing structure,
M&A Purchase Consideration, Offer Premium, On-boarding of Net Identifiable Assets of
target company on to the balance sheet of the acquiring company, Operational Synergies, and
Value Accretion/Dilution are typically discussed, an integrated and logically progressive overview
of how each of these factors affect one another in-connection with a Business Combination is
mandated.

Pedagogical Objectives

To Forecast the Standalone Income Statements, Standalone Income Tax Statements, and
Standalone Closing Balance Sheets of Combining Companies

To derive Purchase Consideration, Total Allocable Purchase Premium, Adjustments to

Deferred Income Tax Liability and Goodwill Creation/Erosion in-connection with a Business
Combination

To construct the first post-M&A Consolidated Balance Sheet with acquisition effects

To derive the Combined Income Statement Forecasts pursuant to incorporation of

acquisition effects

To assess the resultant Value Accretion/Dilution for the original shareholders the acquiring
company

Case Positioning and Setting

This armchair caselet can be used in the following courses in an MBA Program:

Mergers and Acquisitions To obtain a holistic perspective of value creation/erosion owing

to a business combination

Financial Accounting To understand Business Combination Accounting at a granular

level

Institute of Management Technology, Ghaziabad