AM Online

Extended: The inflated price of goodwill

Dealers hoping to sell their business and exit the trade are being blocked by their own overblown expectations of goodwill payments.

AM reported on May 5 that Bristol Street Group’s desire to expand has been hampered by the unrealistic demands of acquisition targets. In four instances during the past two years, chief executive Paul Williams has backed out of acquisition talks because of sellers’ “greed”.

Robert Jones, partner at motor retail accountancy firm Trevor Jones, says owners must consider how goodwill can be justified. Its Dealermatch service has almost 200 businesses registered as seeking either acquisitions or sale, but Jones reports that some sellers are looking for goodwill payments that have no substance.

“Acquirers are willing to pay for goodwill when it can be justified through historic profitability, synergies and future opportunity,” says Jones.

It should generally reflect how the business is doing currently and has performed historically.

If you are not a registered user your comment will go to AM for approval before publishing. To avoid this requirement please register or login.

Comment as guest


Login  /  Register

Comments

No comments have been made yet.