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