Corporate Finance

Goodwill Impairment Testing and Purchase Price Allocation for a European Incumbent Telecoms Operator

An assignment to value 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 to its first reporting date profit performance had slipped and our client was 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.

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