Equity Purchase Price
The first step in purchase price allocation, or PPA, is to determine the purchase price. Also known as the transaction price/value, this is the price paid for the equity of a company and is calculated as shown to the right.
Acquisition-related costs are costs the acquirer incurs to effect a business combination. Those costs include finder’s fees; advisory, legal, accounting, valuation, and other professional or consulting fees; general administrative costs; and costs of registering and issuing debt and equity securities. No acquisition-related costs are included in the purchase price after January 1, 2009, in accordance with FAS 141r. With the exception of costs to issue debt or equity, FAS 141 and FAS 141r differ substantially:
- FAS 141 – Include in purchase price
- FAS 141r – Do not include in purchase price; expense as incurred