The Benefits of a Pre-Deal Purchase Price Allocation for Acquisition Decisions : An Exploratory Analysis

In this paper, we analyze the benefits of a pre-deal purchasing price allocation (pre-deal PPA), which acquirers have come to integrate into an acquisition process to examine the effects of a potential acquisition on the acquirer's financial statements. We take a management perspective and investigate if the tool improves the comprehensiveness and quality of acquisition decisions. Based on an exploratory analysis using the results of semi-structured interviews with 24 accounting professionals from 19 Germany-based companies, we conduct a qualitative content analysis to identify the method's benefits. Our results suggest that, subject to cost-benefit considerations, a pre-deal PPA increases decision quality and leads to more comprehensive acquisition decisions. Furthermore, we propose several best practice approaches to improve the implementation of a pre-deal PPA