Module V· Purchase Accounting & Goodwill - BasicsAdvanced
Question

How sensitive is goodwill to the premium, and how do you show it on a pitch slide?

Answer

Goodwill is highly sensitive to the premium because it is the residual after allocating purchase price to identifiable net assets. Higher offer price means higher goodwill unless additional identifiable assets are recognized. On a pitch slide, show goodwill as a bridge: offer equity value, plus assumed debt-like items, less fair value of identifiable net assets, equals goodwill. Add a sensitivity table for offer premium versus goodwill / goodwill as % of purchase price.