The Challenge

A leading monitored home security company (the “Company”) merged with a leading provider of technologically advanced security and smart home automation solutions (“Transaction”). As a result of the Transaction, the Company’s accounting and financial reporting department faced the following challenges:

• The Company’s independent audit firm had engaged its national specialists to review the technical issues resulting from the Transaction. The Company lacked the necessary technical accounting expertise to appropriately account for the various issues in a way that would pass audit scrutiny of the audit firm’s specialists.
• The Transaction close date resulted in an accelerated timeline to resolve the accounting issues and complete the audited financial statements. The Company lacked the necessary bandwidth to complete all the tasks required on the accelerated timeline, absent outside help.

The Company needed to partner with an experienced advisory firm that had transaction accounting experience to guide it through the steps required to appropriately account for the Transaction on the accelerated timeline.

The Solution

Opportune has extensive experience accounting for similar merger transactions, as well as an established working relationship with the audit firm’s specialists. Opportune was engaged to successfully deliver on the following technical accounting, financial reporting, and technical accounting matters:

Financial Reporting:

• Coordinated external audit of the Company to ensure the final balance sheet was accurate for business combination purposes.
• Proposed methodology to allocate revenues and expenses between the period before the acquisition and the period after the acquisition.
• Prepared journal entries to record purchase price adjustments in the Company’s general ledger as a result of the acquisition.
• Assisted with journal entries to record income and expenses after the acquisition, including post-acquisition revenues, along with depreciation and amortization of purchase price adjustments.

Technical Accounting:

• Business combination vs. asset acquisition considerations.
• Identification of the accounting acquirer.
• Push-down accounting considerations, including preparation of journal entries necessary to reflect all purchase price adjustments in the general ledger.
• Treatment of transaction costs, including allocation between predecessor, successor, and “on the line” costs.
• Accounting for stock compensation acceleration due to the Transaction.