Is an asset identifiable?
An identifiable asset is a commercial or fair asset that can be quantified at a particular moment and is expected to benefit the organization. These assets matter in mergers and acquisitions.
Some assets on a company’s balance sheet can be rapidly and precisely evaluated. Therefore, only those can be identified. Examples include cash, short-term liquid investments, property, inventory, and equipment.
Goodwill and identifiable assets can be compared.
Recognizing Assets
When the acquiring firm acquires another, it can value identified assets it reasonably expects to benefit from. Identifiable assets include both actual and intangible assets. Identifiable assets are crucial to business valuation.
The acquiring business registers identified assets on its balance sheet. You can sell assets such as machinery, cars, buildings, and other equipment. The company should purchase the marketing firm to show goodwill because it cannot quickly evaluate its worth despite having some tangible assets.
How Identifiable Assets Are Used
For example, a conglomerate corporation may acquire a smaller manufacturing firm and a startup online marketing company. Manufacturing companies often have identifiable assets such as property, equipment, inventory, and others, as much of their value is related to tangible assets.
However, future earnings would likely value the Internet marketing business with few assets. The company should purchase the marketing firm to show goodwill because it cannot quickly evaluate its worth despite having some tangible assets.
Identifiable Assets vs. Goodwill
Company ABC has an identified value if its assets are $22 million and its liabilities are $10 million:
Assets minus liabilities = $12 billion
The premium value when Company XYZ buys Company ABC for $15 billion is $3 billion. The acquirer’s financial sheet will include $3 billion in goodwill as it exceeds identified assets.
T-Mobile and Sprint’s early 2018 merger is one example. 1 The purchase was worth $35.85 billion as of March 31, 2018, according to an S-4 filing. The fair value of assets was $78.34 billion, and liabilities were $45.56 billion.
SEC. “Form S-4 Registration Statement, T-Mobile US, Inc.,” Page 243—difference between assets and liabilities: $32.78 billion. Over the fair value of the identifiable assets and liabilities, the deal’s goodwill would be $3.07 billion ($35.85 – $32.78).
Conclusion
- You can assign a fair value or estimated selling price to liquid investments, machinery, automobiles, buildings, and other equipment.
- Goodwill differs from identifiable assets, which might be tangible or intangible.
- These are on a company’s balance sheet and affect takeover offer valuation.
