Allocation of Purchase Price

Challenge: 

A large multinational consumer products company acquired a South American company operating in the same space. The transaction was highly synergistic. The multinational believed that the target would provide a channel to distribute its proprietary products. The multinational engaged VRC to estimate the value of the PP&E and intangible assets for financial reporting purposes.

Solution: 

Using proprietary models, VRC developed an estimate of the value of the PP&E and intangible assets. The intangible assets included several brands and customer relationships. Goodwill was also a significant asset given the premium paid for the target and expected synergies (that were unique to the buyer). The valuation was reviewed by management and reviewed and approved by a Big 4 auditor. The multinational presented the results of our analysis in its 10-k filing.