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BUSINESS COMBINATIONS

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A business combination is bringing together two or morePreviously separate companies under Common control.

Control over a company gained by acquiring a majority ofthe company's voting shares or by acquiring the net assetsof the other company.

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Types of Business CombinationsTypes of Business Combinations

A A CompanyCompany

(a) Merger

A Company

B Company

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Types of Business CombinationsTypes of Business Combinations

(b) Consolidation

CC CompanyCompany

AA CompanyCompany

BB CompanyCompany

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Types of Business CombinationsTypes of Business Combinations

AA CompanyCompany

B Company

(c) Stock Acquisition(c) Stock Acquisition

A A CompanyCompany

B Company

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ABOUT KEANE INC:- ABOUT KEANE INC:- ( THE ACQUIRING ( THE ACQUIRING COMPANY)COMPANY)

Industrial classification (services-Computer Industrial classification (services-Computer Program)Program)

Keane is one of the worldKeane is one of the world great great information technology services firms. In information technology services firms. In business since 1965, 50 offices in USA, business since 1965, 50 offices in USA, Canada, and UK, Keane helps his clients Canada, and UK, Keane helps his clients leverage technology to optimize business leverage technology to optimize business performance through use and performance through use and management of information technology.management of information technology.

Keane has more than 8,200 employees Keane has more than 8,200 employees and annual revenue of $872 million.and annual revenue of $872 million.

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ABOUT METRO ABOUT METRO :-( THE ACQUIRED :-( THE ACQUIRED COMPANY)COMPANY)

Industrial classification (services-computer Industrial classification (services-computer program)program)

Metro Information services, Inc. provides a Metro Information services, Inc. provides a wide range of IT consulting and custom wide range of IT consulting and custom software development services. Services software development services. Services offered by metro include application system offered by metro include application system development, IT engineering, systems development, IT engineering, systems consulting, project outsourcing and general consulting, project outsourcing and general support services.support services.

Metro has more than 4,700 employees and Metro has more than 4,700 employees and annual revenue of $313 million.annual revenue of $313 million.

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KEANE ACQUISITION OF METRO INFORMATION SERVICEKeane 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.

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BUYER Metro shareholders

15,978,804 shares

TARGET

7,669,826 shares(0.48)

Stock-for-stock

Transaction

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Metro shareholder

s

Keane shareholders

As a result of

stock transaction

Ownership percentage after Merger:

Keane stockholders 90.2%

Metro stockholders 9.8%

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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…………………$141,585Fair value of options exchanged……………………………$6,754Cost of financial advisory,Legal & accounting fees….. $8,500Transaction bounses paid to some of metro officers….$5,610TOTAL……………………………………………………… $162,449

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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.

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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………………………………$46,100Goodwill……………………………………………....$154,333

TOTAL $162,449

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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))

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Accounting after Accounting after acquisitionacquisition

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.

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Net current assets 313,614 42,436 356,050

Fixed tangible assets 43,053 2,790 45,843

Intangible assets 43,819 46,100 89,919

Goodwill 71,984 154,333 226,317

Total assets 472,470 718,129

Liabilities 75,858 83,210 159,068

Capital stock 118,321 148,339 266,660

Deferred merger cost 14,110 14 ,110

Retained earnings 278,291 278,291

Total 472470 718,129

Before merger Acquired assets & liabilities

After merger

KEANE INC. BALANCE SHEET

(in thousands)

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THE ENDTHE END