Big Number
November 24 2015 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 11/24/15)
By Emily Chasan
$25.7B: Total value of goodwill write-downs in 2014.
Corporate acquisitions that haven't worked out are taking a toll
on balance sheets.
U.S. public companies recorded $25.7 billion in goodwill
impairments, or write-downs, last year,according to a study of more
than 8,700 firms from corporate financial adviser Duff &
Phelps.The figure is upfrom $21.7 billion in 2013 but still less
than levels in 2012, when impairmentstopped $50 billion.
The biggest number of companies in at least five years took hits
to goodwill, or intangible assets, in 2014, with 341 companies
reporting write-downs, up from 274 in 2013.
"The trend is moving toward bigger impairments," said Greg
Franceschi, a managing director at Duff & Phelps.
The energy sector, hurt by the decline in oil prices, dominated
goodwill write-downs last year with 32 companies, or 23% of the
industry, reporting charges to goodwill, according to the study.
The sector tallied $5.8 billion ingoodwillwrite-downsin 2014, up
from $2.1 billion in 2013.
Devon Energy Corp. recorded the largest goodwill write-down last
year, according to Duff & Phelps. The firm took a $1.9 billion
fourth-quarter charge on a decade-old Canadian acquisition of gas
assets. Devon Energysaid at the time that the noncash charge was
"related to the recent drop in oil prices."
On average, individual companies took charges to goodwill of
about $75 million last year, down 5% from the average in 2013,
according to Duff & Phelps.
The torrent of deals announced this year means write-downs could
surge next year, since companies often take their impairment one or
two years after a deal closes, Mr. Franceschi said. If interest
rates rise, that could affect the overall market value of companies
and spur larger goodwill write-downs next year. Microsoft Corp.,
for example, said in July that it was taking a $7.6 billion
goodwill write-down on its $9.4 billion deal for Nokia's handset
business. The deal closed in April 2014.
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(END) Dow Jones Newswires
November 24, 2015 02:47 ET (07:47 GMT)
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