The Purchase Price Allocation Analyze Early to Avoid Future Earnings Surprises
The purchase price allocation (PPA) process, often treated as an afterthought in mergers and acquisitions (M&A), can help guide a deal to a more predictable conclusion. In the most rewarding deals, a prompt PPA process helps acquirers analyze, from a financial reporting point of view, the primary drivers or intangible values associated with the transactions. The PPA process can help align an acquirer’s business vision with its financial reporting – a necessary first step toward realizing the anticipated earnings per share. A well-considered and well-executed process can also prevent Day Two earnings surprises due to unanticipated dilutive (or accretive) effects from larger- (or smaller-) than-anticipated accretion, depreciation, and amortization expenses of the acquired assets and liabilities.