Goodwill impairment testing and purchase-price allocation
Corporate finance

Valuing the key intangible and tangible assets of a mobile telecoms operator following its acquisition by our client.


Challenge

Our client had recently purchased a mobile operator. However, in the period leading to its first reporting date, profit performance had slipped and our client had been forced to consider whether a write-down of goodwill would be required under International Accounting Standards. 

Approach

Creating a cash-flow forecast based on our understanding of the dynamics in the specific market and the economics of the subsidiary’s business, we identified a value range for the business.

 

We also identified comparable multiples drawn from listed operators and relevant M&A transactions to provide an additional guide to likely market valuation.

Value

As a result of our work our client was able to take the decision to write down the value of its investment to a defensible level.

 

We subsequently revalued the operator's various assets and liabilities, including intangibles such as its customer base and spectrum licenses, enabling it to recalculate the carrying value of goodwill.