Tue, Mar 19, 2019

2018 European Goodwill Impairment Study Was Featured in the Wall Street Journal

Mike Weaver, Managing Director and Head of Valuation Advisory Services, EMEA, was quoted in the Wall Street Journal regarding the effect a no-deal Brexit could have on goodwill impairment in the UK.

In the event of a no-deal Brexit, the UK's gross domestic product (GDP) would shrink between 5% - 8%; there could be a decline in the UK's economic activity; and the value of British firms' recent deals could decrease - prompting a series of goodwill impairments - cites The Wall Street Journal.

The Wall Street Journal reports that the uncertainty surrounding Brexit has already negatively affected UK deal-making, stating that deal value has decreased by 47% in 2018, and the number of deals decreased by 22% from 2017.

Mike Weaver said, "We will see a spike in goodwill impairments in the UK in case of a no-deal Brexit, and a decline in the EU.” He also advised that recent deals in the aerospace, pharmaceuticals, financial services and auto industries will be most vulnerable to write-downs.

Duff & Phelps has found that UK goodwill impairments increased dramatically in 2018. The top 15 goodwill write-downs for UK companies in the STOXX® Europe 600 index was up 63% (reaching €4.23 billion).

Read the full 2018 European Goodwill Impairment Study.

“When it comes to goodwill impairments, we have to wait a little longer before we can to see the true impact, as there is a natural lag before companies report impairments on previous acquisitions,” Weaver said.

Weaver advised that a no-deal Brexit could make companies based in the UK look for other assets and production sites in the EU, thus boosting deal-making and economic growth in other countries of the EU.

Read the full article here

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