On October 13, 2016 RSP Permian (RSPP) announced the acquisition of Silver Hill Energy (SHE) for approximately $2.4 billion dollars. SHE will receive approximately $1.182 billion in RSPP common stock and $1.25 billion in cash. Based on RSPP disclosures, the assets received include (1) wells currently producing 15,000 barrels of oil equivalent per day (BOEPD); and (2) 41,000 in net acreage throughout Loving and Winkler County Texas.
The source of new capital has changed in the venture capital industry, as there has been an increase in nontraditional investors – including pension plans, hedge funds and mutual funds. From growing regulation and transparency to growing capital and propped-up valuations, this rise of the nontraditional investor has had a profound effect on VC. It’s an odd situation, where new players are welcomed and then threaten to change the rules of the game.
Earnings adjustments are an important part of a valuation professional’s bag of tricks, but they are susceptible to misuse. The purpose of earnings adjustments is to convert the income statement from one that is backward-looking to one that is forward-looking. In this post, we review some characteristics of legitimate (and questionable) earnings adjustments.
Mergers and acquisition activity relays much information to the general public: trading multiples, future expectations, the premium paid for a company above and beyond the company’s tangible and intangible assets, to name a few. In our bi-annual Lab Services Newsletter, we observe M&A transactions within the industry, and further analyze the largest acquisition(s) to gain insight behind the deal.
One question that the FASB has wrestled with over the last few years is if goodwill should be amortized or not. It’s been over a decade since amortization was replaced in favor of a periodic two-step goodwill impairment assessment. Adoption of these provisions has varied greatly. Now, more changes to this system are in the works, as the FASB Board met last week and made a few tentative decisions regarding the accounting for goodwill impairment for public and private entities.
