Forum Archive Index - August 2001

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Peter,

>
> Gerry - that's an interesting point about the amount of goodwill
> ($400M-$500M) that will be carried on the DAD balance sheet post
> 'merger'
> 
> Those who haven't read the article from the New York Observer that
> Ben brought to our attention the other night should do so. The BCH
> and DAD 'merger' is much the same sort of situation that was talked
> about in that article - share issues and share swaps funding
> acquisitions and creating mountains of goodwill. I hope that the
> outcome is different in this case.
> 
> The goodwill, $400M-$500M,  that has been created in this deal is
> essentially the difference between Baycorp's book value and its
> market capitalisation  - the result of their exceptional performance
> over many years.
> 
>


What you have described is certainly the accounting definition of 
Goodwill.  I think the 'Buffett' value of goodwill is slightly 
different.   WB might argue that far from being written off, as DAD 
and BCH integrate their business and draw out synergistic profits, 
then the 'goodwill' (or the amount a hypothetical third bidder might 
pay for the combined 'Baycorp Advantage') might actually increase.

That NY Observer article you referenced talked about the goodwill 
associated with some 'none too strong' grocery brands.  My 
impression is that the "Baycorp brand" is far more robust than 
something like that.

Perhaps if you thought of this goodwill on the balance sheet as a 
measure of the BCH/DAD 'brand value' then all of you Baycorp and Data 
Advantage investors might sleep more easily in your beds.

SNOOPY

(disclosure: do not hold BCH or DAD)



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Message posted by Harry Tennyson
 using Pegasus Mail 2.55
I have Word 97 to read attachments
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