Accounting acquirer
M&A / Merger ModelThe party IFRS 3 identifies as having obtained control in a business combination, whose assets are not restated and whose comparatives are presented.
Every business combination has one, including a transaction announced as a merger of equals. Purchase accounting then runs against the other party: a purchase price allocation, fair value step ups, newly recognised intangibles and the amortisation that follows.
The indicators are the ones you would expect. Which shareholder base ends up with the larger stake and the voting power, the composition of the board and of senior management, whether either side paid anything resembling a premium, and relative size. No single factor decides it and the assessment is made in the round.
Where the accounting acquirer is not the legal acquirer, the transaction is a reverse acquisition. A listed shell issuing shares to the owners of a much larger private business is the standard case: the shell is the legal acquirer and the private business is the accounting acquirer, so the accounts are the private business's accounts with the shell folded in.
The practical consequence catches people out. A deal presented publicly as nobody buying anybody still produces accounts in which one company's assets are carried at fair value as at completion and the other's carry on at historic cost, and in which the prior year comparatives are the accounting acquirer's alone.
Worked example
Two companies combine and the announcement calls it a merger of equals. A's shareholders end up with 58% of the combination, A supplies the chief executive and A is the larger business.
A is the accounting acquirer. B's property, brands and customer relationships are restated to fair value at completion and amortised thereafter, while A's assets carry on unchanged.
The first set of combined accounts therefore shows A's prior year as the comparative, with B included only from the completion date. Reported growth in that year is a reporting artefact, not performance.