4. When a publicly traded company acquired the operating assets of another compa

Question

4. When a publicly traded company acquired the operating assets of another company in a cash-for-assets deal, the overall purchase price had to be allocated among the assets. Due to time pressures, the company’s CFO decided to retain the company’s auditors to perform this asset allocation task. The company’s auditors are highly reputable and have substantial experience valuing the kinds of assets that were involved in the acquisition. The auditors submitted a written bid, and they submitted the lowest fee of all bidders who participated. Do you applaud the CFO’s efforts for getting all of this done on time and on budget? Explain?

Explanation / Answer

In any merger and acquisition related transaction, time is of utmost essence and the acquiring company needs to complete the transaction as soon as possible. The post-merger integration is toughest for any company and it should be done quickly to reconcile the assets of the acquired company and merge it with the acquiring company. This is a complex and lengthy task as the company needs to evaluate all the assets at a fair value which should not boat the overall asset of the merged entity. So, in this case, I feel that the CFO has done the right thing by completing the tasks on time and on budget. By employing the reputed auditing agency, he has ensured that the best minds are doing the strategic exercise and it will be acceptable to all the stakeholders involved. There is a transparency in the process and fair evaluation. So the CFO has achieved all the strategic objectives of the post-merger integration activities.

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