tpwalsh123 wrote:Hi Waldo
Pardon my ignorance, but what is 'good will' and what is it's significance?
Tom
In general, good will is a value that is above and beyond the value of the real assets. You can think if it as value of the "brand".
For example, let's assume there were two identical amusement parks that were up for sale.
Assume one is "Disneyland" and the other is "Waldoland". Each park is identical in every way (location, rides, revenues, etc.). The only thing different is that everyone knows Disneyland and no one has every heard of "Waldoland".
One wold assume that Disneyland would sell at a huge premium because, well, it is Disneyland. That premium would be the true value of the "good will".
So, Avaya is basically stating that if they were to sell themselves outright then the company who buys Avaya would be willing to pay $4 billion above the actual value of the assets (less the debt and liabilities) because of the name "Avaya". Put another way, they are stating that if they were public again then they would get $4 billion more in the IPO because of the goodwill.
I wonder what the Nortel books had for the value of goodwill when Avaya bought them.
What I don't know is how a company actually calculates the "good will" number that they show on the books.