GOODWILL

GOODWILL

1. Is the immaterial value derived from factors such as the customers, efficiency, organization, credits, prestige, experience, and the position of the enterprise or business before third parties, a good location, quality merchandise or services, good relationships with the workers, labor stability, and the trust achieved in the financial sector because of good management.

   • Only acquired intangibles are valued
   • Goodwill is often not identified
   • The increased value of the intangible assets is not acknowledged:
   • Intangibles are undervalued

2. Some examples of negotiations of intangible assets

   • Walt Disney paid 7.5 billion dollars for the Pixar digital animation studio.
     • The intangible assets, brand and commercial names were valued in only 200 million dollars while the goodwill assets were valued in 5.6 billion dollars. This is another example of overestimation of goodwill assets and underestimation of the identified intangible assets.
   • Proctor and Gamble purchased Gillette in 63 billion dollars in 2005
     • The intangible assets were valued in 55 billion dollars, of which 35 billion corresponded to goodwill, representing 63.6 % of the intangible value. Hence, there was an overestimation of the intangible goodwill assets and an underestimation of the identified intangible assets.
   • In 2006, Google purchased YouTube for 1.2 billion dollars
     • which reached the headlines of the brand stock exchange. Out of the entire purchase, only 200 million were attributed to the identified intangible assets and 83.4 % to goodwill. It is known that the success of You- Tube is due to the expertise of the brand to attract subscribers, and therefore, the valuation made for the brand is extremely low.