By Chris Bryant Tara Lachapelle – The global M&A boom has left a giant footprint on corporate balance sheets, and we’re not just talking about all that debt. Goodwill — the difference between what assets are worth on paper and how much an acquirer paid for them — is also soaring, and that could spell trouble for corporate earnings.
At S&P 500 companies, goodwill has risen by two-thirds over the past decade and accounts for more than one-third of net assets.
In the past two years, takeover targets have sold for a median of 11 times Ebitda — essentially 11 years of profit — whereas the multiple was only about 7-9 times in the years leading up to the recent merger frenzy.
As for who’s sitting on the most absolute goodwill, beer takes the cake. Anheuser-Busch InBev SA’s goodwill doubled to a cool $136.5 billion after its $100 billion takeover of SAB Miller Plc.
Impairments deplete shareholder equity, which makes lenders and bondholders nervous. Companies that financed takeovers with lots debt are particularly exposed. more> https://goo.gl/Ube7e8
Posted in Banking, Business, Economy, Education, History, Leadership, Media, Net
Tagged Business, Capital, Debt, Financial crisis, Government, Leadership, M&A
By Josh Pacewicz and Stephanie Lee Mudge – Many struggling U.S. cities and states compete fiercely with one another to attract and keep firms that offer jobs. Unfortunately, these are not the “good” jobs that Americans are looking for, jobs with middle-class pay, benefits and security.
This race to the bottom drains public coffers, preoccupies local leaders and fuels voter cynicism. “America First” sidesteps the problem.
Since the corporate mergers and restructurings in the 1980s, most cities depend not on one or two large factories but on many small subsidiary operations — light manufacturing, food processing, professional service firms, call centers, hotels and retail. These smaller subsidiaries mostly move between struggling cities and towns rather than leaving for other countries.
Much of the blame for that falls on federal policy. Unions have been hobbled by a changing legal environment. A corporate merger wave unleashed by financial deregulation eliminated local owners who paid workers living wages and contributed generously to their towns.
Tax code changes led to ballooning senior managers’ earnings at the expense of line-workers’ wages. Without changing the federal policies that led to these trends, bringing manufacturing back will not create good, safe jobs. more> https://goo.gl/leRpP1
Posted in Banking, Business, CONGRESS WATCH, Economic development, Economy, History, Leadership, Media, Regulations
Tagged Business, Capital, Congress Watch, Donald Trump, Government, Jobs, Leadership, M&A, United States
Charged Up: GE Shows Investors Its Energy Playbook
By Tomas Kellner – The acquisition of Alstom’s energy assets delivered $1.5 billion in synergies in 2016, $300 million above GE’s original five-year target for Alstom synergies, GE’s Chief Financial Officer Jeff Bornstein told investors at a conference in New York held by GE’s Power and Renewable Energy businesses last week. “Alstom makes us more competitive,” Bornstein said. “It broadens the service base and creates long-term incremental value.”
Jobs, cash, costs and software were the key themes at the conference. Bornstein said GE Oil & Gas was now “applying the same methodology” to its planned merger with Baker Hughes. “The businesses are very complementary,” he said. “It’s going to be a merger of equals.” Bornstein said he was “highly confident” the deal would “deliver a lot more value than $1.6 billion” in synergies by 2020, the target the companies released when they announced the deal last October.
Bornstein also talked about the need to speed up the shrinking of GE’s $25 billion in “structural costs,” which are funding support functions, R&D, corporate operations and other expenses. more> https://goo.gl/z07MkD
Posted in Banking, Business, Economy, Energy & emissions, Science, Technology
Tagged Business improvement, Capital, Energy, GE, Industrial economy, Productivity, Technology