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I am not familiar with the details of their business. But I assume they got the goodwill into their balance sheet by typical mismanagement: 1. Their markets a

I am not familiar with the details of their business. But I assume they got the goodwill into their balance sheet by typical mismanagement: 1. Their markets are shrinking 2. Instead of shrinking company operations to adapt, they buy even less successful competitors for an overprice, so goodwill in the balance sheet 3. Not unsurprisingly integrating the not so successful competitor into the company is not so successful, employees are demotivated abd business suffers even more 4. Now a company with growing costs operating on a shrinking market gets even less profitable I don't claim healthily shrinking a company to adapt to a shrinking market is easy. But I'm sure it must be doable. Looks like business management largely fails in this discipline.

tim333 7y ago
Mostly correct. They bought MyTravel and it did't work out https://www.reuters.com/article/us-mytravel-thomascook/thomas-cook-to-buy-rival-mytravel-idUSL1242804720070212 https://www.reuters.com/article/us-mytravel-thomascook/thoma...
treis 7y ago
>But I assume they got the goodwill into their balance sheet by typical mismanagement: Virtually every company will have a market value greater than their book value. So any company that buys other companies will have goodwill on their balance sheet. Google, for example, has 18 billion dollars worth from all of their various acquisitions. Take a company like Nest for example. They had assets like patents, infrastructure, cash, accounts receivable, etc. If you add those all up and subtract their liabilities you get a book value of 100 million, as a totally made up number. Google comes along and buys them for 3.2 billion dollars. The transaction, from a book value perspective, has 3.2 billion in cash going out from Google and 100 million dollars of assets coming back. That looks like Google paid 3.2 billion for 100 million in assets, or in other words, just lost 3.1 billion dollars of value. To prevent that goodwill is added to the equation. The books have Google paying 3.2 billion dollars in cash for 100 million in assets and 3.1 billion in goodwill. Now Google paid 3.2 billion in cash for 3.2 billion in assets and it doesn't look like they lost value.

tim333 7y ago

Mostly correct. They bought MyTravel and it did't work out https://www.reuters.com/article/us-mytravel-thomascook/thomas-cook-to-buy-rival-mytravel-idUSL1242804720070212 https://www.reuters.com/article/us-mytravel-thomascook/thoma...

treis 7y ago

>But I assume they got the goodwill into their balance sheet by typical mismanagement: Virtually every company will have a market value greater than their book value. So any company that buys other companies will have goodwill on their balance sheet. Google, for example, has 18 billion dollars worth from all of their various acquisitions. Take a company like Nest for example. They had assets like patents, infrastructure, cash, accounts receivable, etc. If you add those all up and subtract their liabilities you get a book value of 100 million, as a totally made up number. Google comes along and buys them for 3.2 billion dollars. The transaction, from a book value perspective, has 3.2 billion in cash going out from Google and 100 million dollars of assets coming back. That looks like Google paid 3.2 billion for 100 million in assets, or in other words, just lost 3.1 billion dollars of value. To prevent that goodwill is added to the equation. The books have Google paying 3.2 billion dollars in cash for 100 million in assets and 3.1 billion in goodwill. Now Google paid 3.2 billion in cash for 3.2 billion in assets and it doesn't look like they lost value.