The Accounting Technique Valeant Used to Help It Buy Company After Company [Bloomberg]
Regardless of whether Citron Research's accusations that Valeant was the "pharmaceutical Enron" or not, the company's accounting practices are getting a hard look from every angle now. That includes those practices that were essential to its business model, called earnings add-backs:
Such add-backs allow companies to include expected savings or extra revenue in their adjusted, or pro forma, earnings numbers. They are often deployed before transformational M&A deals, and Valeant has, to put it mildly, had a few of those. As others have pointed out, accounting conventions assume that big deals are a rare occurrence; in Valeant’s case they were the norm.
When Valeant agreed to buy Bausch & Lomb for $8.7 billion in 2013, for instance, it estimated that add-backs and synergies would increase its adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, from $2.035 billion to $2.468 billion. The $433 million boost to earnings had the effect of dampening Valeant’s leverage, or indebtedness, to 4.6 times earnings, according to Standard & Poor’s LCD unit.
This practice allowed Valeant to boost "adjusted earnings, flatter its leverage profile, and ensure continued access to relatively cheap bonds and loans to help fuel further expansion." Which was essential for a company that spends almost nothing on R&D.
PWC tailored San Antonio office for technology industry, expands offerings for first time in years [SABJ]
In case you haven't heard, Millennials are in charge:
PWC representatives indicated earlier this year that about half of its San Antonio workforce are millennials that demand access to a vibrant and accessible workspace. That led the company to choose the ninth floor at Concord Plaza, rather than a downtown location.
What's the alternative to a "vibrant and accessible" office? A lifeless and inconvenient one? That's not gonna get you the talent! I wonder if all this catering to Millennials could be due to the possibility that they are chock full of common sense. It could be something else, but figured I'd put it out there.
Why Bad Guys Win at Work [HBR]
Interestingly enough, "dark triad personalities" are extraverted, open to new experiences, curious and have higher self-esteem. The problem is that these behaviors can often be detrimental to the organization:
In an impressive analysis of all the scientific studies published between 1951 and 2011, Machiavellianism, narcissism, and psychopathy were all positively linked with counterproductive work behaviors and poor organizational citizenship, and Machiavellianism and psychopathy were also negatively linked to actual job performance (as opposed to career success). As reviews have highlighted, “Ponzi schemes, internet fraud, embezzlement, insider trading, corruption, and malfeasance” can all be attributed to dark triad personality traits.
In other news:
- CPA starts accordion museum. [HC]
- Dov Charney is broke and can't afford a lawyer. [Bloomberg]
- Deadly interstates. [Vox]
- Amazon's brick and mortar bookstore sounds so Amazon. [Quartz]
- "Phil Collins must be stopped." [AOL]