1 BUSINESS COMBINATIONS

2 A business combination is bringing together two or more Previously separate companies under Common control. Control over a company gained by acquiring a majority of the company's voting shares or by acquiring the net assets of the other company.

3 Types of Business Combinations Types of Business Combinations A Company (a) Merger A Company B Company

4 Types of Business Combinations Types of Business Combinations (b) Consolidation C Company A Company B Company

5 Types of Business Combinations Types of Business Combinations A Company B Company (c) Stock Acquisition A Company B Company

6 ABOUT KEANE INC:- ( THE ACQUIRING COMPANY) Industrial classification (services-Computer Program) Keane is one of the world great information technology services firms. In business since 1965, 50 offices in USA, Canada, and UK, Keane helps his clients leverage technology to optimize business performance through use and management of information technology. Keane has more than 8,200 employees and annual revenue of $872 million. Keane has more than 8,200 employees and annual revenue of $872 million.

7 ABOUT METRO :-( THE ACQUIRED COMPANY) Industrial classification (services-computer program) Metro Information services, Inc. provides a wide range of IT consulting and custom software development services. Services offered by metro include application system development, IT engineering, systems consulting, project outsourcing and general support services. Metro has more than 4,700 employees and annual revenue of $313 million.

8 KEANE ACQUISITION OF METRO INFORMATION SERVICE Keane acquired all the voting shares of metro in a stock- for-stock transaction, accounted for using the purchase method. Total Purchase Price US$ 162Million, Including assumption of debt.

9 BUYER Metro shareholders 15,978,804 shares TARGET 7,669,826 shares (0.48) Stock-for-stock Transaction

10 Metro shareholders Keane shareholders As a result of stock transaction Ownership percentage after Merger: Keane stockholders 90.2% Metro stockholders 9.8%

11 The total cost of the merger was $162,449 determined as follows ( in thousands):-  Fair value of Keane shares issued to Metro shareholders In exchange for their surrendered stock ………………… $141,585  Fair value of options exchanged …………………………… $6,754  Cost of financial advisory,Legal & accounting fees ….. $8,500  Transaction bounses paid to some of metro officers ….$5,610 TOTAL ……………………………………………………… $162,449

12 Allocation of Cost of the acquired Company Under the Purchase method of accounting for business combinations, the cost of the acquired company must be allocated to the assets acquired and liabilities assumed based on their estimated fair market values on the date of combination. Any excess of the total costs over the Net assets of the acquired company is assigned to Intangible assets if any and to goodwill.

13 Based upon the valuation of tangible and intangible assets acquired and liabilities assumed, keane has allocated the total cost of the merger to the net assets of Metro as follows:-(in thousands)  Net tangible assets ………………………………… $(37,984)  Net Intangible assets ……………………………… $46,100  Goodwill ……………………………………………....$154,333 TOTAL $162,449

14 The following table presents the amounts assigned by keane Inc. to each of the major assets and Liabilities acquired of Metro at acquisition date:-( in thousands) Cash $622 Accounts receivable $40,810 Other current assets $1,004 Property, plant & equipment,net $2,790 TOTAL ASSETS $45,226 (A) Accounts payable $3,583 Accrued compensation $9,800 Other liabilities $3,889 Note payable $65,938 Total Current liabilities $83,210 (B) ) Fair value of Net assets (A-B) ……………… $(37,984)

15 Accounting after acquisition Under the purchase Method of accounting for a business combination, the acquiring company adds to its balance sheet the assets acquired and the liabilities assumed, and reduces its cash account or increases its equity account to reflect the surrendered resources.

16 Net current assets 313,614 42, ,050 Fixed tangible assets 43,053 2,790 45,843 Intangible assets 43,819 46,100 89,919 Goodwill 71, , ,317 Total assets 472, ,129 Liabilities 75,858 83, ,068 Capital stock 118, , ,660 Deferred merger cost 14,110 14,110 Retained earnings 278, ,291 Total ,129 Before merger Acquired assets & liabilities After merger KEANE INC. BALANCE SHEET (in thousands) = = = = + + = = + =

17 THE END