Two sources for comparable ‘useful life’ transactions

BVWireIssue #107-1
August 3, 2011

CFOs and valuation analysts performing purchase price allocation analyses (ASC 805) need to assess the useful lives of the intangibles in the acquired company. Pratt’s Stats subscribers already have access to nearly 2,000 purchase price allocations (from official filings), complete with “living” data. Here’s a random sample from one Pratt’s Stats transaction:

Allocation of the Purchase Price:

  • Cash and cash equivalents, $26,000,000
  • Accounts receivable, net $22,000,000
  • Intangible assets, $120,000,000
  • Deferred tax assets, $53,000,000
  • Other assets, $10,000,000
  • Deferred revenue, ($25,000,000)
  • Other liabilities, ($8,000,000)

Intangible Assets Acquired:

  • Customer relationships – subscription, hosting & maintenance, and perpetual software: $37,000,000 (10-year useful life)
  • Customer relationships – professional services: $13,000,000 (4 years); Developed technology: $60,000,000 (7 years)
  • Trademarks/trade names: $10,000,000 (10 years)

Identifying and valuing those intangibles is the next important step in the process, and Mark Zyla (Acuitas) will present a comprehensive overview in his Advanced Workshop on Valuation Issues under ASC 805 and Business Combinations, coming this November 3rd.

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