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FIFTH ANNUAL EUROPEAN GOODWILL IMPAIRMENT STUDY – DUFF & PHELPS
FIFTH ANNUAL EUROPEAN GOODWILL IMPAIRMENT STUDY – DUFF & PHELPS
Published by Gbaf News
Posted on December 22, 2017
Global Banking and Finance Review
Company
Published by Gbaf News
Posted on December 22, 2017
Duff & Phelps, the premier global valuation and corporate finance advisor, today announced the results of its fifth annual European Goodwill Impairment Study.
Goodwill impairments among UK companies in the STOXX® Europe 600 Index increased twofold, from €7.7bn in 2015 to €13.7bn in 2016. This marks the highest level in three years for these companies, placing the UK on top as the country with the largest goodwill impairment amount recorded in 2016. The study also tracked levels of goodwill impairment across the FTSE 100 index and found that 21% of its constituents recorded goodwill impairments, doubling from €5.8bn in 2015 to €12.4bn in 2016. However, the largest UK impairment event in 2016 accounted for 37% of the country’s total impairment amount and 41% of the FTSE 100 aggregate goodwill impairment.
Total goodwill impairment recorded by European listed companies in the STOXX® Europe 600 declined by 24%, from €37 billion in 2015 to €28 billion in 2016, reflecting an improved outlook for the global economy, despite some lingering economic uncertainty. According to the study, a combined €24.8bn, or approximately 88% of the overall goodwill impairment, was recorded by STOXX® Europe 600 companies based in three of the EU countries analysed – the UK, France, and Germany. By comparison, approximately €22.6bn of impairment in aggregate was recognised by FTSE 100, CAC 40, and DAX 30 index members.
Michael Weaver, Managing Director at Duff & Phelps, commented,”2016 was a significant year for both the UK and European economy, as industry waited for the reverberations of the Brexit vote. Though many predicted a decline in mergers and acquisitions, the UK actually performed well and remained a hotspot for international investment, as buyers took advantage of the weakening pound and largely stable economy.”
He added that “Despite this robust M&A activity, UK companies continue to see a lot of impairments, and the UK was the European country within the STOXX® Europe 600 index with the highest aggregate amount of goodwill impairment in 2016 (€13.7bn). Goodwill impairments were principally concentrated in the telecommunications, financials and consumer discretionary industries. The top impairment event in the UK accounted for almost 40% of this total amount but, even removing this event, the aggregate impairment would still have risen by 31%. The overall impairment trend highlights the need for companies to undertake comprehensive valuations prior to making acquisitions.”
Across the STOXX® Europe 600 and various benchmark country indices, levels of goodwill impairment by European companies were also measured across ten industries. Within the STOXX® Europe 600 index, eight out of ten industries saw an increase in companies that carry goodwill in 2016, reflecting a strong year for M&A. In particular, consumer staples saw the biggest gain with 100% of companies carrying goodwill, an increase of 13.6% from 2015.
Other study highlights include:
Michael Weaver concluded, “The data on goodwill impairment shows that 2016 was a tough year for telecommunications, but a much-improved one for the energy industry. Sector dynamics clearly have an impact on the levels of impairment, as one or two big deals can also have a huge impact on the overall numbers. Past performance is no guarantee of the future – so CFOs really do need to ensure they’re dynamically and proactively valuing acquired assets.”
Duff & Phelps, the premier global valuation and corporate finance advisor, today announced the results of its fifth annual European Goodwill Impairment Study.
Goodwill impairments among UK companies in the STOXX® Europe 600 Index increased twofold, from €7.7bn in 2015 to €13.7bn in 2016. This marks the highest level in three years for these companies, placing the UK on top as the country with the largest goodwill impairment amount recorded in 2016. The study also tracked levels of goodwill impairment across the FTSE 100 index and found that 21% of its constituents recorded goodwill impairments, doubling from €5.8bn in 2015 to €12.4bn in 2016. However, the largest UK impairment event in 2016 accounted for 37% of the country’s total impairment amount and 41% of the FTSE 100 aggregate goodwill impairment.
Total goodwill impairment recorded by European listed companies in the STOXX® Europe 600 declined by 24%, from €37 billion in 2015 to €28 billion in 2016, reflecting an improved outlook for the global economy, despite some lingering economic uncertainty. According to the study, a combined €24.8bn, or approximately 88% of the overall goodwill impairment, was recorded by STOXX® Europe 600 companies based in three of the EU countries analysed – the UK, France, and Germany. By comparison, approximately €22.6bn of impairment in aggregate was recognised by FTSE 100, CAC 40, and DAX 30 index members.
Michael Weaver, Managing Director at Duff & Phelps, commented,”2016 was a significant year for both the UK and European economy, as industry waited for the reverberations of the Brexit vote. Though many predicted a decline in mergers and acquisitions, the UK actually performed well and remained a hotspot for international investment, as buyers took advantage of the weakening pound and largely stable economy.”
He added that “Despite this robust M&A activity, UK companies continue to see a lot of impairments, and the UK was the European country within the STOXX® Europe 600 index with the highest aggregate amount of goodwill impairment in 2016 (€13.7bn). Goodwill impairments were principally concentrated in the telecommunications, financials and consumer discretionary industries. The top impairment event in the UK accounted for almost 40% of this total amount but, even removing this event, the aggregate impairment would still have risen by 31%. The overall impairment trend highlights the need for companies to undertake comprehensive valuations prior to making acquisitions.”
Across the STOXX® Europe 600 and various benchmark country indices, levels of goodwill impairment by European companies were also measured across ten industries. Within the STOXX® Europe 600 index, eight out of ten industries saw an increase in companies that carry goodwill in 2016, reflecting a strong year for M&A. In particular, consumer staples saw the biggest gain with 100% of companies carrying goodwill, an increase of 13.6% from 2015.
Other study highlights include:
Michael Weaver concluded, “The data on goodwill impairment shows that 2016 was a tough year for telecommunications, but a much-improved one for the energy industry. Sector dynamics clearly have an impact on the levels of impairment, as one or two big deals can also have a huge impact on the overall numbers. Past performance is no guarantee of the future – so CFOs really do need to ensure they’re dynamically and proactively valuing acquired assets.”
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