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BUSINESS

COMBINATIONS
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business combination is bringing together two or more


eviously separate companies under Common control.

ntrol over a company gained by acquiring a majority o


e company's voting shares or by acquiring the net asse
the other company.
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Types of Business Combinations


(a) Merger

A Company
A Company
B Company

Types of Business Combinations


(b) Consolidation

A Company
C Company
B Company

Types of Business Combinations


(c) Stock Acquisition

A Company

A Company

B Company

B Company
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ABOUT KEANE INC:- ( THE ACQUIRING


COMPANY)
Industrial classification (services-Computer
Program)

Keane is one of the world great


information technology services firms. In
business since 1965, 50 offices in USA,
Canada, and UK, Keane helps his clients
leverage technology to optimize business
performance through use and
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management of information technology.

ABOUT METRO :-( THE ACQUIRED


COMPANY)
Industrial classification (services-computer
program)

Metro Information services, Inc. provides a


wide range of IT consulting and custom
software development services. Services
offered by metro include application system
development, IT engineering, systems
consulting, project outsourcing and general
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support services.

KEANE ACQUISITION OF METRO INFORMATION


SERVICE
Keane acquired all the voting shares of metro in a
stock-for-stock transaction, accounted for using
the purchase method.
Total Purchase Price US$ 162Million, Including
assumption of debt.

15,978,804 shares

Metro shareholders
7,669,826 shares
(0.48)

BUYER

Stock-for-stock

TARGET

Transaction
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Keane
shareholders

Metro
shareholder
s

Ownership percentage after


Merger:
Keane stockholders

90.2%

Metro stockholders

9.8%

As a result of
stock transaction
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The total cost of the merger was $162,449


determined as follows ( in thousands):-

Fair value of Keane shares issued to Metro shareholder


In exchange for their surrendered stock
$141,585
Fair value of options exchanged
$6,754
Cost of financial advisory,Legal & accounting fees..
$8,500
Transaction bounses paid to some of metro officers.
$5,610

TOTAL
$162,449

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Allocation of Cost of the acquired Company


Under the Purchase method of accounting for
business combinations, the cost of the acquired
company must be allocated to the assets
acquired and liabilities assumed based on their
estimated fair market values on the date of
combination.
Any excess of the total costs over the Net assets
of the acquired company is assigned to
Intangible assets if any and to goodwill.

Based upon the valuation of tangible and


intangible assets acquired and liabilities
assumed, keane has allocated the total cost of
the merger to the net assets of Metro as
follows:-(in thousands)
Net tangible assets
$(37,984)
Net Intangible assets
$46,100
Goodwill....$154,333
TOTAL
$162,449

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The following table presents the amounts assigned by keane


Inc. to each of the major assets and Liabilities acquired of
Metro at acquisition date:-( in thousands)
Cash

$622

Accounts receivable

$40,810

Other current assets

$1,004

Property, plant & equipment,net

$2,790

TOTAL ASSETS

$45,226

Accounts payable

$3,583

Accrued compensation

$9,800

(A)

Other liabilities

$3,889

Note payable
$65,938
Total Current liabilities

$83,210

(B)

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Accounting after
acquisition
Under the purchase Method of accounting for
a business combination, the acquiring
company adds to its balance sheet the assets
acquired and the liabilities assumed, and
reduces its cash account or increases its
equity account to reflect the surrendered
resources.
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KEANE INC. BALANCE SHEET


(in thousands)
Acquired assets After merger
& liabilities

Before merger
Net current assets
313,614
Fixed tangible assets 43,053
Intangible assets
43,819
Goodwill
71,984
Total assets
472,470
Liabilities
75,858
Capital stock
118,321
Deferred merger cost
Retained earnings
278,291
Total
472470

+
+
+
+

42,436
2,790
46,100
154,333

=
=
=
=

+
+
+

83,210
148,339
14,110

=
=
=

356,050
45,843
89,919
226,317
718,129
159,068
266,660
14 ,110
278,291
16
718,129

THE END

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