Goodwill evaporates from European stocks
European companies are likely to write off €165bn this year as they review the value of their 'goodwill'.
European stocks face more turbulence. In good times, companies pay a premium known as 'goodwill' when they take over another firm. This is a reflection of the value of the target's intangible assets such as its brand name or market share.
Accounting rules force companies to review goodwill annually, notes Alexis Xydias on Bloomberg.com, and with the good times well and truly over the pan-European market fell by 46% last year hefty write-downs are now on the cards.
JPMorgan says Europe faces the largest reductions in the value of goodwill, with €165bn likely to be written off this year. In the short term, "it's a catastrophe for share prices", says Jerome Forneris of Banque Martin Maurel. Expect some "bad surprises".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But on the plus side, it "cleans things up" and reduces overall uncertainty, says Guillaume Duchesne at Fortis Private Banking.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
Christmas at Chatsworth: review of The Cavendish Hotel at Baslow
MoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
By Dr Matthew Partridge Published
-
Tycoon Truong My Lan on death row over world’s biggest bank fraud
Property tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
By Jane Lewis Published