Purchase Price

The process of allocating the total price paid in a business combination to identifiable tangible assets, intangible assets, and liabilities, with any residual assigned to goodwill. PPA is required under IFRS 3 and ASC 805 and is the primary mechanism through which acquired intangible assets are recognised on the balance sheet.

A business combination in which the fair value of the identifiable net assets acquired exceeds the consideration transferred, resulting in a gain rather than goodwill. Under IFRS 3 and ASC 805, the acquirer must reassess whether all assets and liabilities have been correctly identified and measured before recognising a bargain purchase gain in profit or loss.

An intangible asset that meets the identifiability criteria under IFRS 3 or IAS 38, meaning it is either separable from the entity (can be sold, transferred, or licensed independently) or arises from contractual or legal rights. Identified intangible assets are recognised separately from goodwill in purchase price allocations.

The tax effect arising from temporary differences between the fair values assigned to assets and liabilities in a purchase price allocation and their corresponding tax bases. Under IAS 12 and ASC 740, deferred tax liabilities are recognised on the step-up in fair value of acquired intangible assets (which typically have zero tax basis), while deferred tax assets may arise on assumed liabilities.

An initial estimate recognised in a purchase price allocation when the accounting for a business combination is incomplete at the end of the reporting period in which the acquisition occurs. Under IFRS 3 and ASC 805, the acquirer has a measurement period of up to 12 months from the acquisition date to finalise the fair values of identifiable assets, liabilities, and consideration.

An element of M&A purchase price that is payable only if specified future conditions are met, such as revenue targets or product milestones. Contingent consideration must be measured at fair value at the acquisition date and is particularly common in deals where intangible asset values are uncertain.

A potential obligation arising from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the entity's control, or a present obligation where payment is not probable or the amount cannot be reliably measured. Under IFRS 3, contingent liabilities assumed in a business combination are recognised at fair value at the acquisition date even if it is not probable that an outflow of resources will be required, provided fair value can be reliably measured.

The configuration of financial, legal, and operational terms governing a merger, acquisition, or investment transaction. Deal structure encompasses the mix of cash and equity consideration, earn-out arrangements, escrow provisions, representations and warranties, indemnification mechanisms, and governance rights.

Patent Valuation: Methods, a Worked Example and What a Patent Is Worth

Patent valuation in practice: what drives how much a patent is worth, the four methods valuers use under IVS 210, and a relief-from-royalty calculation that reconciles line by line over a UK patent's remaining legal life, with no terminal value after expiry.

How do I finance a business acquisition?

Combine sources into a capital stack: your equity, senior bank debt, asset-based lending, IP-backed lending against intangible assets, and vendor finance such as loan notes or an earn-out.

What is a vendor loan note?

A vendor loan note is an arrangement where the seller lends part of the purchase price back to the buyer, repaid over time with interest. It bridges the gap between the price a seller wants and the cash a buyer can raise.

How much money do I need to buy a business?

Often much less than the headline price. Acquisitions are usually funded with a mix of your own equity, bank or asset-based debt, and vendor finance, so the cash you need upfront can be a fraction of the total.