What is Mergers and Acquisitions (M&A)?
Mergers and acquisitions (M&A) are corporate transactions where two businesses combine, either through a merger of equals or the acquisition of one by another, accounted for under IFRS 3 using the acquisition method.
How It Works
- Identify the acquirer and the acquisition date.
- Measure consideration transferred (cash, shares, contingent consideration).
- Allocate purchase price to identifiable assets and liabilities at fair value.
- Recognize goodwill (or bargain purchase gain) as the residual.
Saudi Context
Major Saudi M&A activity (SNB-Samba merger, Aramco-SABIC acquisition, Almarai-Kingdom Holding deals) follows IFRS 3 and is subject to CMA approval for listed entities, GAC approval for competition clearance, and SAMA approval for banks. ZATCA tax neutrality is available for qualifying restructurings under specific conditions.
Example
A Saudi company acquires another for SAR 200,000,000 in cash. Fair value of identifiable net assets = SAR 170,000,000. Goodwill = 200,000,000 – 170,000,000 = SAR 30,000,000 recognized on the balance sheet.