Re:CenturyLink to Buy Level 3 for $34B
by dkrich on Monday October 31, 2016 @03:47PM
(#12840247)
Goodwill is the amount you paid beyond the tangible assets (cash, property, equipment, accounts paid, etc.) on the balance sheet. You can call it what you like, but basically it's something you spent cash on that you have to show on a balance sheet but has no tangible value. This is usually attributed as "synergies", "IP", "brand recognition" and other BS.
[ Parent
| on HN ]
> Goodwill is the amount you paid beyond the tangible assets
Wrong. For example "Hewlett-Packard purchased Autonomy for $11 billion in 2011. The purchase price represented a greater than 65 percent premium over the price at which Autonomy was trading at the time of the announcement. Hewlett-Packard recorded $6.9 billion of goodwill and $4.3 billion of other intangible assets in connection with the acquisition."
Ha and how'd that work for them? According to the Wikipedia entry, "within a year HP had written off $8.8 billion of the value."
Thanks for helping me make my point.
You're welcome. Just to be clear, I agree that paying too much when making acquisitions is not a good business model. But goodwill is not the reason for overpaying, or an excuse for overpaying. Goodwill is the consequence of overpaying.