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Purchase Accounting For M&A

We are an LLC. The PE group owns 49% and the majority owners are going to buy out their interest for $40m using bank debt. Net total equity of the company is $10m. At the end of the day the bank debt will be pushed down to the companies books. Can you help with the journal entries??? Thank you!

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Why not ask your auditors, since they are the one's who will have to agree with any advice you receive here.

Assumption: the 49% PE ownership demands a yearly audit.

Other than that, db cash, cr loan pay. Then db PE equity and cr cash. This because the LLC is buying the equity (if memory serves me correctly).

At end of day, cash is $0, debt is up and equity shoes PE at $0.

Dan English
Title: VP of Finance
Company: Mud Pie LLC
(VP of Finance, Mud Pie LLC) |

Thank you for your response. I was thinking DR 49% equity, credit loan for $40 m, debit intangibles for the balance (goodwill). Not sure if the percentage being purchased (49%) allows the asset write-up.

Regarding asking our auditors, where is the fun of being an accountant if I don't take the first stab, right?

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Honestly, without looking it up, I don't remember, but I didn't factor in paying them more than equity, so you may be right.

But if you ask the auditor now, you sAve aggravation and potential questions later (especially if staff changes).

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