In M&A Accounting, Poolings Have Poor Track Record Boosting Income

Elstein, Aaron, American Banker

Companies using the merger accounting method adopted in many recent bank deals have been turning out subpar returns for shareholders, a study indicates.

In a review of U.S. bank and nonbank mergers worth more than $1 billion, a New York-based management consulting firm found that companies accounting for their deals as poolings of interest failed to beat similar companies' performance 78% of the time.

But companies that accounted for their acquisitions as purchases outperformed their peers 52% of the time during the three-year period examined, Mitchell Madison Group found.

Banks and other companies have turned to the pooling method in part because it is easier to …

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Publication information: Article title: In M&A Accounting, Poolings Have Poor Track Record Boosting Income. Contributors: Elstein, Aaron - Author. Magazine title: American Banker. Volume: 163. Issue: 144 Publication date: July 30, 1998. Page number: 1. © 2009 SourceMedia, Inc. COPYRIGHT 1998 Gale Group.

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