Stout's Q4 2023 Purchase Price Allocation Study Highlights Goodwill's Increasing Role in M&A Valuations

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Nov 11, 2024, 08:38 ET

CHICAGO, Nov. 11, 2024 /PRNewswire/ -- Stout, a leading global advisory firm, has released its Purchase Price Allocation (PPA) Study, revealing a growing emphasis on the valuation of intangible assets and goodwill in mergers and acquisitions (M&A). With regulatory scrutiny and the demand for precise financial reporting, companies are prioritizing the accurate assessment of these intangible assets.

This study is based on an analysis of 130,417 filings and 5,203 transactions, highlighting the valuation of intangible assets and goodwill as a percentage of enterprise value across sectors like Communication Services and Consumer Discretionary. This review of 10-K and 10-Q filings examines key components of purchase price allocation, including goodwill, intangible assets, and contingent consideration, offering benchmarks to evaluate the strategic allocation of intangible assets.

Key Findings:

For Q4 2023 transactions, goodwill represented 47.5% of enterprise value on average, demonstrating its growing significance in M&A valuations.
23.3% of Q4 2023 transactions included contingent consideration, averaging 15.7% of enterprise value, indicating an increasing trend toward performance-driven M&A negotiations.
Goodwill as a percentage of enterprise value increased in several sectors, including Energy, Health Care, Industrials, and Information Technology, underscoring its role in value determination across industries.

"Goodwill and intangible assets are increasingly recognized as vital components of enterprise value, especially in sectors driven by innovation and customer loyalty," said Will Chronopoulos, Vice President, at Stout. "Our study provides essential benchmarks that help companies ensure their valuations are robust and compliant with evolving regulatory standards."

The report highlights the reliance on intangible assets like goodwill, technology, and customer relationships, particularly in sectors where innovation and client loyalty are key drivers of value. Stout's PPA Study offers critical insights and benchmarks that companies can use to guide their financial strategies and ensure compliance with evolving regulations.

"Companies that leverage intangible assets like goodwill and technology are in a stronger position to adapt to changing market conditions and drive long-term value creation," said Shishir Khetan, Managing Director, at Stout. "This PPA study reflects the growing strategic importance of these assets, particularly in M&A transactions where future performance and innovation play a critical role."

To learn more about Stout's expertise in valuation and M&A advisory, please view the full report here.

About Stout

Stout is a global advisory firm specializing in corporate finance, accounting and transaction advisory, valuation, financial disputes, claims, and investigations. We serve a range of clients, from public corporations to privately held companies in numerous industries. Our clients and their advisors rely on our premier expertise, deep industry knowledge, and unparalleled responsiveness on complex matters. Learn about our Relentless Excellence® at stout.com.

Stout is a trade name for Stout Risius Ross, LLC, Stout Advisors SA, Stout Bluepeak Asia Ltd., Stout GmbH, MB e Associati S.r.l., Stout Park Ltd, and Stout Capital, LLC, a FINRA-registered broker-dealer and SIPC member firm. The terms "Stout" or the "firm" refer to one or more of these legally separate and independent advisory practices.

SOURCE Stout