9706 · 3.3.1
Business Acquisition and Merger flashcards
Revision flashcards for Cambridge 9706 Business Acquisition and Merger (syllabus 3.3.1). Flip, recall, then mark a real past-paper question.
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Purchase Consideration
The total value transferred by the acquirer to the former owners of the acquiree. It can include cash, shares, debentures, or other assets.
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Goodwill (on acquisition)
An intangible asset representing the excess of the purchase consideration over the fair value of the net identifiable assets acquired.
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Fair Value
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
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Merger
A business combination where two or more entities join to form a single new entity, and the original entities cease to exist.
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Acquisition
A business combination where one entity (the acquirer) obtains control of another entity (the acquiree), which is then absorbed into the acquirer.
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Gain on Bargain Purchase
Arises when the purchase consideration is less than the fair value of the net identifiable assets acquired. It is recognised as a gain in the acquirer's profit or loss.
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Business Purchase Account
A temporary ledger account used by the acquirer to record the details of an acquisition. It is debited with the purchase price and credited with the net assets taken over.
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Synergy
The concept that the combined value of two companies will be greater than the sum of their individual parts (the '2+2=5' effect). It's a primary reason for mergers and acquisitions.