Wayne -
This might be of interest -
Message 15069967
"...Just yesterday, the FASB announced monumental changes in how goodwill is accounted for. As everyone knew, the Pooling of Interests method of merging companies is no longer allowed. (This bothered many companies in Silicon Valley, including acquisitive Cisco, because of the requirement to amortize goodwill.) The surprise, at least for me, is that the FASB has also indicated that companies no longer need to amortize goodwill. They suggest that a one-time write-off of excess goodwill be taken when a company is acquired, and then just leave the remainder un-amortized on the balance sheet.
This is extremely important, since companies like WIND can now acquire other companies without the silly constraints associated with trying to qualify for pooling. They can use any combination of stock, cash or anything else of value. This frees WIND to buy back stock any time they choose outside of the quiet period, without issuing euphormisms about buying stock to compensate for options. For example, WIND could start buying stock tomorrow to squeeze the shorts who are aggressively tanking the stock.
It also means any future acquisition adds to upcoming revenues. This is extremely important given the current economic environment. In an upcoming lackluster year for revenue growth, companies will savor the revenue gains now possible through acquisitions without suffering the earnings-deadening amortization of goodwill.
In summary, 2001 is shaping up as the biggest M&A year of record because:
1. Tech stocks are at bargain levels, and can be bought with cash as well as stock.
2. The purchase method, the only way left to acquire, does not require restating past revenues, meaning that acquired revenues show up as growth.
3. Excess goodwill need not be amortized, lowering the apparent earnings, while having no effect on cash.
4. The Clinton antitrust police will be replaced by less onerous regulators.
Microsoft was the first out of the shoot with the just-announced purchase of Great Plains Software. Expect a whole lot more. In particular, expect WIND to acquire along with everyone else, and possibly be acquired like a lot of others."
Regards, Don |
