Net Working Capital (NWC) is one of the most contentious points in a deal process and a topic that is frequently ignored on the front end of a transaction. NWC is derived from a company’s balance sheet and represents current assets, less current liabilities at a given point in time.
In a recent article published by Bloomberg, John Yeager, Director of Business Transformation Services at Bennett Thrasher, discusses several factors behind the recent trend of accounting firms acquiring technology companies.
Many practitioners are familiar with the benefit of using disregarded entities (DEs) or Single Member Limited Liability Companies (SMLLCs) in structuring merger & acquisition transactions. However, advisors should also consider the advantages of using F-reorganizations to solve certain problems that can be encountered when forming a SMLLC.
Earn-out provisions are often utilized in merger and acquisition (M&A) transactions to bridge gaps between sellers and buyers. For example, when the buyer cannot justify paying more than $45 million for the subject entity and the seller will not settle for less than $50 million, a carefully-structured earn-out contingency may help delay, and possibly relieve, the disagreement.
As investors increase their demands for financial statements that are more reliable, more relevant, and less an accounting of history (no pun intended), the two primary global bodies charged with establishing standards of financial accounting that govern the preparation of financial reports – Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) – have sought to meet those needs through promulgation of a consistent set of standards.