Identifiable intangibles garner bigger share of PPAs

BVWireIssue #169-3
October 19, 2016

More value is being allocated to identifiable intangible assets, while goodwill is holding steady, according to the latest report from Houlihan Lokey on purchase price allocations. The analysis examines 563 transactions in which the acquiring company was based in the United States and publicly held. The study uses “purchase consideration,” which is the sum of the purchase price paid and liabilities assumed in connection with a business combination.

Increasing share: The percentage of the purchase consideration allocated to intangible assets increased to 34% on average in 2015, up from 30% in 2014. The percentage of purchase consideration allocated to goodwill is 38% on average in 2015, the same percentage reported for 2014. Contingent consideration (earnouts) represented 21% of purchase consideration (up from 20% in 2014).

The categories of intangible assets acquirers most commonly identified all show percentage increases in terms of frequency of identification: customer-related intangibles, cited in 69% of deals (up from 59% in 2014); trademarks and trade names, 50% (up from 45%); developed technology, 44% (up from 40%); and in-process research and development, 10% (up from 7%). Other intangible assets typically included were noncompete agreements, licenses, permits, and other contracts or agreements.

If you want to see how others assign remaining useful lives to these intangibles, take a look at Benchmarking Identifiable Intangibles and Their Useful Lives in Business Combinations, available here from BVR.

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