medium · Private Equity accounting-flow
A sponsor acquires a business with a $40M net pension deficit.
How should this be treated in the enterprise-to-equity bridge, and how does it affect PPA?
- It is added directly on top of the enterprise value figure, which raises the total purchase price paid.
- It is ignored in the equity bridge entirely but booked as an intangible asset under PPA.
- It is treated as an asset step-up because the sponsor can now manage the pension plan more efficiently than before.
- It is a debt-like item that reduces equity value; in PPA, it is recognized as a liability at fair value.
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