Goodwill Calculation after LBO - LBO modeling
Hi,
Do i add or subtract existing goowdill (target's goodwill) to the new pro forma Goodwill?
Thanks in advance.
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Target's existing goodwill is always written-off and pro-forma goodwill will be the goodwill of the acquiring firm plus that created in the transaction
Completely agree, but do you know what the logic is of adding back (writing off) the target's existing goodwill?
Existing goodwill is just an accounting item related to the business pre-acquisition, it is a non-transferrable and non-identifiable asset. Hence, you need to write it off
As mentioned above, target co's equity is written off and acquirer co's goodwill is the excess between purchase price and sellers equity.
Referring to your last point, do you mean book vale equity or market value?
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