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This math is wrong. The pension obligations are liabilities and not an immediate expense. Many companies have huge pension liabilities along with monstrous amou
by Maven911 13y ago
This math is wrong.
The pension obligations are liabilities and not an immediate expense. Many companies have huge pension liabilities along with monstrous amounts of debt.
What you need to look at is the equity, in other words assets - liabilities, and if that equity figure is more then 70 million, then the purchaser got a discounted deal.
- spikels 13y agoNo you are confusing the price (or market value) of a company and it's balance sheet. For many reasons the price that a company sells for is almost never the same as the shareholder's equity (i.e. equity = assets - liabilities). First not all assets or liabilities are marked to market (i.e. regularly revalued) generally because some are hard to accurately value (e.g. IP, brand, customer relationships). Second neither assets nor liabilities consider the expected future profits of the company. Third the value of something depends on the buyer and seller as they many have different opinions. Forth the value of an entire or large portion of a business is different than a small portion (control premium). And these are only some of the most important reasons - there are many more! Just take a look at any publicly traded company. The market value of the equity (i.e. market cap) almost never be the same as the shareholder's equity. And if you wanted to buy the entire company you would almost certainly have to pay more than market cap.
- Maven911 13y agoSure, that I know that book values doesn't equal market values. But what was being proposed was that the pension liability is an immediate expense that should be added to the purchased price of the acquistion -- which is something that does not make sense at all.