Compensation in M&A Activity

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  • #88242

    I would like to understand how other valuation experts treat the amount paid as compensation in a business.

    In my understanding, it should not be part of the price paid (for accounting purposes), but should be considered in the expected cash outflow, but what should be the origin of this money?

    And the impacts of the compensation regarding the impairment? Should be considered in both sides for the test?


    The acquirer and the target company most likely have different compensation models. The acquirer would need to honor all contracts with the target employees until integration is complete and a new cycle of performance and compensation kicks off. As a part of the process, every liability and expense is factored into the value of the deal. The acquirer will be responsible for funding those through new loans, stocks, or bonds.


    Totally agree!

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