Acquisition for 200 (100 cash, 100 new debt) of a target with 80 book value — 3-statement impact at closing?
Asset deal or PPA logic — the buyer capitalizes the target's net assets at fair value, and the difference to the purchase price is goodwill (here: 200 purchase price − 80 net assets = 120).
no effect — the acquisition is a pure balance-sheet transaction.
| Item | Δ |
|---|---|
| Investing (M&A outflow) | −200 |
| Financing (debt drawdown) | +100 |
| = Δ cash | −100 |
| Account | Δ |
|---|---|
| Cash | −100 |
| Goodwill | +120 |
| Target net assets (PP&E, NWC, etc.) | +80 |
| Debt | +100 |
The change in assets +100 (−100 + 120 + 80) equals the change in equity & liabilities +100 (debt +100, equity unchanged).
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Goodwill is treated as impairment-only under IFRS (no scheduled amortization), but identifiable intangibles (customer relationships, technology) amortize over their useful life and hit the income statement. The interest on the new debt hits the income statement below EBIT.
'PPA allocation is a standard debate in M&A pitches — the more you allocate to goodwill rather than intangibles, the higher the reported EBITDA in subsequent years (no goodwill amortization under IFRS)'.