Global BV News: PPAs in India

BVWireIssue #259-3
April 17, 2024

global business valuation
business combinations, purchase price allocation, business valuation profession, fair value, international business valuation

Almost a third (28%) of the enterprise value of acquired companies in India was allocated to identified intangible assets, and 35% was attributable to goodwill, with the allocation varying considerably from industry to industry, according to an EY study on purchase price allocations (PPAs). The allocation to goodwill in India is largely in line with the proportion allocated in global deals (e.g., in the U.S.). Other key findings:

  • In sectors such as telecommunications, life sciences, retail, consumer products and technology (IT/ITES), a larger portion of deal value is allocated to intangible assets;
  • Capital-intensive sectors, such as real estate and hospitality, energy and metals, allocate more than two-thirds of their enterprise value to tangible assets; and
  • Marketing-related intangibles were the key acquisition driver in the customer products, life sciences, and retail sector; customer-related intangibles seem to be the acquisition driver in the IT/ITES sector.

Noncompete agreements are included in most acquisitions. “However, allocation of value to the non-compete agreement is typically on the lower side, possibly indicating either a shorter life or the perception that the probability/impact of competition is minimal,” the study says.

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