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Goodwill & Impairments Study
The document discusses trends in goodwill and goodwill impairment across various global regions and industries for 2015, highlighting that accumulated goodwill reached $8.3 trillion with significant impairments totaling $14.8 billion. The financial sector exhibited the highest concentration of goodwill, followed by industrials, with substantial impairments also reported in these areas. The report summarizes trends in the United States and Canada, as well as Asia and the Pacific, while presenting a variety of statistical analyses and industry-specific insights.
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Goodwill & Impairments Study
- 1. GoodwillStudy of Goodwill& Goodwill Impairment Trends January 2016 Alps 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
- 2. 1pageA L PS V E N T U RE P A R T N E R S Contents Goodwill Introduction & Concept Global Scenario Region United States & Canada Asia & Pacific Industries Information & Technology Consumer Discretionary Consumer Staples Healthcare Compliances & Valuations 1 2 3 4
- 3. Goodwill & ImpairmentsStudy 2pageA L P S V E N T U RE P A R T N E R S info@alpsvp.com 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 Impairment We 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.
- 4. Goodwill - Global 3pageAL P S V E N T U RE P A R T N E R S $1,061 $937 $325 $1,744 $919 $1,164 $799 $444 $549 $362 Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Accumulated Goodwill 2015 ($ billion)We have observed majority of the goodwill is concentrated in Financial sector followed by Industrials in 2015. Globally $8.3 trillion of accumulated goodwill is recorded across Industries and Regions. 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 2011 2012 2013 2014 2015 AccumulatedGoodwill($billion) Africa / Middle East Asia / Pacific Europe Latin America and Caribbean United States and Canada
- 5. Goodwill Impairment -Global 4pageA L P S V E N T U RE P A R T N E R S $561 $378 $724 $6,440 $1,186 $2,595 $280 $1,077 $302 $1,287 Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Goodwill Impairment 2015 ($ Million) Majority of the Goodwill Impairment is recorded by Financial Sector followed by Utilities and Materials in 2015. Globally $14.8 billion of goodwill is impaired across Industries and Regions. 0 5 10 15 20 25 30 35 2010 2011 2012 2013 2014 2015 Goodwill Impaired($billion) Africa / Middle East Asia / Pacific Europe Latin America and Caribbean United States and Canada *Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ.
- 6. United States andCanada 5pageA L P S V E N T U RE P A R T N E R S 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.
- 7. United States andCanada – Goodwill & Impairment 6pageA L P S V E N T U RE P A R T N E R S Accumulated Goodwill ($ billion) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2011 2012 2013 2014 2015 Goodwill($billion) Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2010 2011 2012 2013 2014 2015 GoodwillImpairment($Million) Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Goodwill Impairment ($ Million) *Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ.
- 8. Asia & Pacific 7pageAL P S V E N T U RE P A R T N E R S 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.
- 9. Asia & Pacific– Goodwill & Impairment 8pageA L P S V E N T U RE P A R T N E R S 0 100 200 300 400 500 600 700 800 900 1,000 2011 2012 2013 2014 2015 Goodwill($billion) Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Goodwill Impairment ($ Million) 0 1,000 2,000 3,000 4,000 5,000 6,000 2010 2011 2012 2013 2014 2015 GoodwillImpairment($Million) Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities *Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ. Accumulated Goodwill ($ billion)
- 10. INFORMATION TECHNOLOGY |CONSUMER STAPLES | HEALTHCARE Industry Focused Analysis
- 11. Information Technology 9pageA LP S V E N T U RE P A R T N E R S 0 100 200 300 400 500 600 700 800 900 2011 2012 2013 2014 2015 Goodwill($billion) Africa / Middle East Asia / Pacific Europe Latin America and Caribbean United States and Canada Primary Sub-Industry Accumulated Goodwill ($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 $2,500 billion of M&A transactions during the last 5 years. *Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ.
- 12. Information Technology 10pageA LP S V E N T U RE P A R T N E R S 0 200 400 600 800 1,000 1,200 1,400 1,600 2010 2011 2012 2013 2014 2015 GoodwillImpairment($Million) Africa / Middle East Asia / Pacific Europe Latin America and Caribbean United States and Canada Primary Sub-Industry Goodwill Impairment ($M)* Semiconductors 106.3 Electronic Components 93.3 Internet Software and Services 20.9 Electronic Manufacturing Services 14.0 IT Consulting and Other Services 12.5 Electronic Equipment and Instruments 7.4 Application Software 7.4 Technology Distributors 6.6 Data Processing and Outsourced Services 4.1 Systems Software 3.7 Technology Hardware, Storage and Peripherals 2.9 Communications Equipment 0.7 *Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ.
- 13. Consumer Discretionary pageA LP S V E N T U RE P A R T N E R S 0 200 400 600 800 1,000 1,200 2011 2012 2013 2014 2015 Goodwill($billion) Africa / Middle East Asia / Pacific Europe Latin America and Caribbean United States and Canada 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 $3,075 billion during last 5 years. *Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ. 11
- 14. Consumer Discretionary pageA LP S V E N T U RE P A R T N E R S 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2010 2011 2012 2013 2014 2015 GoodwillImpairment($Million) Africa / Middle East Asia / Pacific Europe Latin America and Caribbean United States and Canada Primary Sub-Industry Goodwill Impairment ($M) * Education Services 98.4 Specialized Consumer Services 87.0 Hotels, Resorts and Cruise Lines 67.9 Auto Parts and Equipment 64.3 Consumer Electronics 50.3 Automobile Manufacturers 25.9 Publishing 23.3 Apparel, Accessories and Luxury Goods 21.9 Home Furnishings 21.6 Textiles 19.8 Casinos and Gaming 18.0 Movies and Entertainment 13.2 Advertising 10.9 Department Stores 10.9 Distributors 8.6 Broadcasting 6.3 Tires and Rubber 3.4 *Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ. 12
- 15. Consumer Staples pageA LP S V E N T U RE P A R T N E R S 0 100 200 300 400 500 600 700 800 900 1,000 2011 2012 2013 2014 2015 Goodwill($billion) Africa / Middle East Asia / Pacific Europe Latin America and Caribbean United States and Canada 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 $1,547 billion in this industry during the last 5 years. *Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ. 13
- 16. Consumer Staples pageA LP S V E N T U RE P A R T N E R S 0 500 1,000 1,500 2,000 2,500 3,000 2010 2011 2012 2013 2014 2015 GoodwillImpairment($Million) Africa / Middle East Asia / Pacific Europe Latin America and Caribbean United States and Canada Primary Sub-Industry Goodwill Impairment ($M) * Soft Drinks 131.1 Packaged Foods and Meats 124.0 Agricultural Products 78.5 Drug Retail 31.1 Hypermarkets and Super Centers 4.6 Household Products 3.8 Brewers 2.2 Distillers and Vintners 1.2 Food Retail 0.8 Personal Products 0.7 *Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ. 14
- 17. Healthcare pageA L PS V E N T U RE P A R T N E R S 0 100 200 300 400 500 600 700 800 900 1,000 2011 2012 2013 2014 2015 Goodwill($billion) Africa / Middle East Asia / Pacific Europe Latin America and Caribbean United States and Canada 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 $1,570 billion during the last 5 years. *Source: CapitalIQ. Goodwill and Goodwill Impairment as recorded in CapitalIQ. 15
- 18. Healthcare pageA L PS V E N T U RE P A R T N E R S Primary Sub-Industry Goodwill Impairment ($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 0 200 400 600 800 1000 1200 1400 2010 2011 2012 2013 2014 2015 GoodwillImpairment($Million) Africa / Middle East Asia / Pacific Europe Latin America and Caribbean United States and Canada *Source: CapitalIQ. Industry Goodwill refers to goodwill reported in year 2015 as in CapitalIQ. 16
- 19. Alps Venture Partnershas 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
- 20. Financial Reporting andTax Compliance Services IRC 409a We 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 Measurement We 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 Programs We 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 2 Our 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 3 We 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 Election Alps 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. 17pageA L P S V E N T U RE P A R T N E R S info@alpsvp.com
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