Goodwill & Impairments Study

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Goodwi ll Study of Goodwill & Goodwill Impairment Trends January 2016 Alps Venture Partners AMERICAS | ASIA PACIFIC | EUROPE

Transcript of Goodwill & Impairments Study

Page 1: Goodwill & Impairments Study

GoodwillStudy of Goodwill & Goodwill Impairment Trends

January 2016Alps Venture Partners

A M E R I C A S | A S I A PA C I F I C | E U R O P E

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ContentsGoodwill Introduction & Concept Global Scenario

Region United States & Canada Asia & Pacific Industries Information & Technology Consumer Discretionary Consumer Staples Healthcare

Compliances & Valuations

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Goodwill & Impairments Study

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Goodwill is the excess of the purchase price paid for an acquired entity and the amount of the price not assigned to acquired assets and liabilities. It arises when an acquirer pays a high price to acquire another business/asset over and above the identified assets.If the fair value is less than carrying value (Goodwill is said to be impaired), the goodwill value needs to be reduced so the carrying value is equal to the fair value. The impairment loss is reported as a separate line item on the income statement, and new adjusted value of goodwill is reported in the balance sheet.We have relied on CapitalIQ for the current analysis. Our methodology for selection of Goodwill and Goodwill Impairment is presented below:

Goodwill Goodwill ImpairmentWe have collated the data points for goodwill greater than $20M reported by companies across regions and Industries.

Any positive Goodwill Impairment is considered for the analysis. We have not considered negative impairments (goodwill add back) in the analysis.

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Goodwill - Global

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$1,061

$937

$325

$1,744

$919

$1,164

$799

$444

$549

$362

Consumer Discretionary Consumer StaplesEnergy FinancialsHealthcare IndustrialsInformation Technology MaterialsTelecommunication Services Utilities

Accumulated Goodwill 2015 ($ billion)We have observed majority of the

goodwill is concentrated in Financial sector followed by Industrials in 2015.Globally $8.3 trillion of accumulated goodwill is recorded across Industries and Regions.

2011 2012 2013 2014 20150

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Africa / Middle East Asia / Pacific Europe

Latin America and Caribbean United States and Canada

Accu

mul

ated

Goo

dwill

($ b

illio

n)

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Goodwill Impairment - Global

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$561 $378$724

$6,440

$1,186

$2,595

$280 $1,077

$302$1,287

Consumer Discretionary Consumer StaplesEnergy FinancialsHealthcare IndustrialsInformation Technology MaterialsTelecommunication Services Utilities

Goodwill Impairment 2015 ($ Million)Majority of the Goodwill Impairment is

recorded by Financial Sector followed by Utilities and Materials in 2015.Globally $14.8 billion of goodwill is impaired across Industries and Regions.

2010 2011 2012 2013 2014 20150

5

10

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20

25

30

35

Africa / Middle East Asia / Pacific Europe

Latin America and Caribbean United States and Canada

Good

will

Impa

ired

($ b

illion

)

*Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ.

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United States and Canada

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United States and Canada Region has witnessed $1,863 billion of Mergers & Acquisitions in 2015 and $7,200 billion in past 5 years. Goodwill is concentrated in these primary industries:

Industry Accumulated Goodwill ($B)

Diversified Banks 351.7

Regional Banks 255.9

Integrated Telecommunication Services 148.0

Aerospace and Defense 141.1

Packaged Foods and Meats 138.9

Pharmaceuticals 113.6

Movies and Entertainment 110.3

Oil and Gas Storage and Transportation 102.5

Technology Hardware, Storage and Peripherals 102.2

Data Processing and Outsourced Services 96.4

Electric Utilities 85.5

*Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ.

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United States and Canada – Goodwill & Impairment

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Accumulated Goodwill ($ billion)

2011 2012 2013 2014 20150

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Consumer Discretionary Consumer StaplesEnergy FinancialsHealthcare IndustrialsInformation Technology MaterialsTelecommunication Services Utilities

Good

will

($ b

illio

n)

2010 2011 2012 2013 2014 20150

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Consumer Discretionary Consumer StaplesEnergy FinancialsHealthcare IndustrialsInformation Technology MaterialsTelecommunication Services Utilities

Good

will

Impa

irmen

t ($

Mill

ion)

Goodwill Impairment ($

Million)

*Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ.

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Asia & Pacific

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Asia & Pacific Region witnessed Mergers & Acquisitions aggregating $1,110 billion in 2015 and $4,440 billion during the past 5 years. Goodwill is concentrated in these primary industries:

Industry Accumulated Goodwill ($B)

Diversified Banks 76.3

Industrial Conglomerates 44.8

Wireless Telecommunication Services 38.7

Integrated Telecommunication Services 36.1

Pharmaceuticals 27.3

Electric Utilities 25.6

Technology Hardware, Storage and Peripherals 23.3

Oil and Gas Exploration and Production 19.5

Packaged Foods and Meats 19.3

Food Retail 17.4

Integrated Oil and Gas 16.7

*Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ.

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Asia & Pacific – Goodwill & Impairment

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2011 2012 2013 2014 20150

100

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1,000

Consumer Discretionary Consumer StaplesEnergy FinancialsHealthcare IndustrialsInformation Technology MaterialsTelecommunication Services Utilities

Good

will

($ b

illion

)

Goodwill Impairment ($

Million)

2010 2011 2012 2013 2014 20150

1,000

2,000

3,000

4,000

5,000

6,000

Consumer Discretionary Consumer StaplesEnergy FinancialsHealthcare IndustrialsInformation Technology MaterialsTelecommunication Services Utilities

Good

will

Impa

irmen

t ($

Mill

ion)

*Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ.

Accumulated Goodwill ($ billion)

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INFORMATION TECHNOLOGY | CONSUMER STAPLES | HEALTHCARE

Industry Focused Analysis

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Information Technology

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2011 2012 2013 2014 20150

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Africa / Middle East Asia / Pacific Europe

Latin America and Caribbean United States and Canada

Good

will

($ b

illio

n)

Primary Sub-Industry Accumulated Goodwill ($B)

Application Software 104

Technology Hardware, Storage and Peripherals 130

Data Processing and Outsourced Services 114

Internet Software and Services 93

IT Consulting and Other Services 90

Systems Software 77

Communications Equipment 66

Semiconductors 46

Electronic Equipment and Instruments 22

Electronic Components 14

Semiconductor Equipment 12

Home Entertainment Software 12

Technology Distributors 11

Electronic Manufacturing Services 9

Information Technology witnessed $280 million of impairment in 2015. It is the rising sector of new millennium with $2,500 billion of M&A transactions during the last 5 years.

*Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ.

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Information Technology

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2010 2011 2012 2013 2014 20150

200

400

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1,000

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1,400

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Africa / Middle East Asia / Pacific Europe

Latin America and Caribbean United States and Canada

Good

will

Impa

irmen

t ($

Mill

ion)

Primary Sub-Industry GoodwillImpairment ($M)*

Semiconductors 106.3

Electronic Components 93.3

Internet Software and Services 20.9

Electronic Manufacturing Services 14.0

IT Consulting and Other Services 12.5

Electronic Equipment and Instruments 7.4

Application Software 7.4

Technology Distributors 6.6

Data Processing and Outsourced Services 4.1

Systems Software 3.7

Technology Hardware, Storage and Peripherals 2.9

Communications Equipment 0.7

*Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ.

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Consumer Discretionary

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2011 2012 2013 2014 20150

200

400

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Latin America and Caribbean United States and Canada

Good

will

($ b

illio

n)

Primary Sub-Industry Accumulated Goodwill ($B)

Cable and Satellite 155.6

Movies and Entertainment 128.9

Broadcasting 85.9

Publishing 85.7

Apparel, Accessories and Luxury Goods 67.9

Advertising 64.1

Automobile Manufacturers 51.2

Restaurants 49.6

Auto Parts and Equipment 49.1

Casinos and Gaming 40.5

Hotels, Resorts and Cruise Lines 38.8

Internet Retail 23.5

Specialty Stores 21.5

Department Stores 18.0

Education Services 17.0

Catalog Retail 16.2

Apparel Retail 13.8

Consumer Discretionary witnessed $560 million of impairment in 2015. M&A transactions aggregating $3,075 billion during last 5 years.

*Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ.

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Consumer Discretionary

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2010 2011 2012 2013 2014 20150

200

400

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1,000

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Africa / Middle East Asia / Pacific Europe

Latin America and Caribbean United States and Canada

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will

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irmen

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Mill

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Primary Sub-Industry GoodwillImpairment ($M) *

Education Services 98.4

Specialized Consumer Services 87.0

Hotels, Resorts and Cruise Lines 67.9

Auto Parts and Equipment 64.3

Consumer Electronics 50.3

Automobile Manufacturers 25.9

Publishing 23.3

Apparel, Accessories and Luxury Goods 21.9

Home Furnishings 21.6

Textiles 19.8

Casinos and Gaming 18.0

Movies and Entertainment 13.2

Advertising 10.9

Department Stores 10.9

Distributors 8.6

Broadcasting 6.3

Tires and Rubber 3.4

*Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ.

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Consumer Staples

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2011 2012 2013 2014 20150

100

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900

1,000

Africa / Middle East Asia / Pacific Europe

Latin America and Caribbean United States and Canada

Good

will

($ b

illio

n)

Primary Sub-Industry Accumulated Goodwill ($B)

Packaged Foods and Meats 253

Brewers 161

Food Retail 98

Household Products 79

Hypermarkets and Super Centers 74

Personal Products 61

Soft Drinks 55

Tobacco 51

Drug Retail 47

Food Distributors 25

Distillers and Vintners 21

Agricultural Products 12

Consumer Staples witnessed $376.0 million of impairment in 2015. M&A transactions aggregating $1,547 billion in this industry during the last 5 years.

*Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ.

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Consumer Staples

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2010 2011 2012 2013 2014 20150

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2,000

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Africa / Middle East Asia / Pacific Europe

Latin America and Caribbean United States and Canada

Good

will

Impa

irmen

t ($

Mill

ion)

Primary Sub-Industry GoodwillImpairment ($M) *

Soft Drinks 131.1

Packaged Foods and Meats 124.0

Agricultural Products 78.5

Drug Retail 31.1

Hypermarkets and Super Centers 4.6

Household Products 3.8

Brewers 2.2

Distillers and Vintners 1.2

Food Retail 0.8

Personal Products 0.7

*Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ.

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Healthcare

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2011 2012 2013 2014 20150

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Africa / Middle East Asia / Pacific Europe

Latin America and Caribbean United States and Canada

Good

will

($ b

illio

n)

Primary Sub-Industry Accumulated Goodwill ($B)

Pharmaceuticals 366

Healthcare Services 145

Healthcare Equipment 127

Managed Healthcare 74

Healthcare Facilities 61

Healthcare Distributors 41

Life Sciences Tools and Services 38

Biotechnology 36

Healthcare Supplies 20

Health Care Technology 12

Healthcare witnessed $1,185 million of impairment in 2015. M&A transactions totaling $1,570 billion during the last 5 years.

*Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ.

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Healthcare

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Primary Sub-Industry GoodwillImpairment ($M) *

Healthcare Facilities 635.1

Health Care Technology 417.5

Biotechnology 64.5

Life Sciences Tools and Services 30.4

Pharmaceuticals 24.2

Healthcare Distributors 6.8

Healthcare Services 5.6

Healthcare Equipment 1.1

Healthcare Supplies 0.3

Managed Healthcare 0.0

2010 2011 2012 2013 2014 20150

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Latin America and Caribbean United States and Canada

Good

will

Impa

irmen

t ($

Mill

ion)

*Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ.

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Alps Venture Partners has established a team of experts that have experience in valuing businesses across diverse industry sectors and all developmental stages; ranging from clients with seed funding to pre-IPO stage. With the team having experience of both valuations and audits, our detailed and insightful valuation appraisal reports, along with our responsive support, help our clients easily pass through any stringent audit review process in a smooth, efficient and time-bound manner.Tax Compliance Financial Reporting Strategic Valuation

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Financial Reporting and Tax Compliance ServicesIRC 409aWe have experience of handling more than 2000+ 409a valuations across Industries. With the team having experience of both valuations and audits, our detailed and insightful Section 409A appraisal reports, along with our responsive support, help our clients easily pass through any stringent audit review process in a smooth, efficient and time-bound manner.

Fair Value MeasurementWe help PE and VC clients to comply with ASC 820 and IFRS 13 standard’s complex provisions and avoid any audit issues in their quarterly and annual reporting.

Relative TSR ProgramsWe value the awards with Relative TSR metrics, using sophisticated modeling techniques which allow clients to quickly and accurately value new grants.

Our business valuation experienced team along with the team of veteran Patent lawyers position us uniquely to assist clients in completing annual Goodwill and Investment Impairment testing.

ASC 350 / IAS 38

ASC 718 (FAS 123R)/IFRS 2Our experienced team at Alps Venture Partners has performed hundreds of stock options valuations for ASC 718 for privately held companies and publicly listed companies across diverse industry sectors and enterprise development stages.

ASC 805 / IFRS 3We have unmatched proficiency in delivering Business Combinations Accounting solutions to clients in varied industries. Our comprehensive USPAP compliant appraisal reports are auditable and cost-effective, and help our clients stay focused on the deal.

IRC 83 B ElectionAlps Venture Partners has extensive experience in assisting companies seeking to comply with IRC 83 B election. Failing to make a timely 83(b) election may lead to disastrous tax consequences for a start-up company founder or employee.

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Corporate Finance Services

We provide clients with high quality research, analytical and advisory support for transactions. We offer a range of services such as initial opportunity assessment, market analysis, financial modeling, commercial and financial due diligence, valuation, capital structure planning, and deal structuring. Investment

Opportunity Assessment

Target Identification Preparation of Pitch

Books Buyer & Seller

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Financial Due Diligence etc.

Transaction advisory

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Financial ModelingWhether it is evaluating new business ventures, proposed transactions or financial and operational strategies, a robust and dynamic financial model is an integral component to the decision-making process.

Transaction IdentificationWe can help by global target identification considering the requirements with maximum synergy.

The financial due diligence process is a necessity to any transaction. Our aim is to enable owners and managers to make such investments with confidence by supporting and advising at every stage. We will help reduce the risk – and stress – of investing at home or in another country.

Due Diligence

Custom ResearchWe provide clients with customized research report, model, decks with client specific requirements such as: Business plan

development, Diagnostic review of

operations Competitor

benchmark analysis Intellectual Property

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