Valuation of goodwill on technical and financial grounds
The valuation of goodwill enables the additional value provided by intangible assets that differentiate a company and allow it to generate future profits, such as brand, clientele, know-how, location or reputation, to be determined. It is an essential process in business purchase and sale operations, mergers, spin-offs or audits, as it provides an objective reference for setting prices and negotiating with guarantees. It also ensures transparency with investors, auditors and regulatory bodies, offering defensible reports with accounting, legal and tax validity.
We are a leading company with more than 30 years of experience in advising companies in the areas of Consultancy and Valuation. Having the backing of an independent consultancy firm such as Gesvalt for the valuation of goodwill provides methodological rigour, objectivity and independence, with conclusions that can be defended before an audit and are aligned with the applicable accounting frameworks (IFRS and PGC).
What is goodwill and why is it important to value it?
Accounting and economic definition of goodwill
Goodwill is an intangible asset that reflects the additional value of a company compared to its tangible assets, derived from its ability to generate future profits. It is recognised for accounting purposes in acquisition transactions and economically represents the difference between market value and book value.
Components: brand, clientele, know-how, location, reputation
It includes key intangible elements such as brand, customer portfolio, know-how, strategic location, business reputation or business relationships, all of which provide sustainable competitive advantages.
When it is necessary to value it: sales and purchases, mergers, audits, litigation
The valuation of goodwill is essential in company acquisitions, mergers and acquisitions, financial audits or litigation, as it helps to determine an objective value, support strategic decisions and provide certainty to investors and regulators.
How is goodwill valued?
Most commonly used methods: residual goodwill, multiples, discounted cash flows
The valuation of goodwill can be approached using different approaches. The residual method of goodwill calculates the difference between the market value of the company and the fair value of its net assets, thus isolating the intangible value.
The market multiples analysis compares financial indicators (EBITDA, sales, profits) with similar companies in the sector to obtain an objective benchmark. Finally, the discounted cash flow projection (DCF) estimates future earning capacity, discounted to present value using an appropriate discount rate.
Requirements and necessary documentation
In order to value goodwill, it is essential to have at one's disposal historical financial information as well as audited financial statements to ensure the reliability of the data. The following are also analysed relevant contracts (leases, licenses, commercial agreements), together with a sectoral and competitive study that contextualises the company's position. In addition, specific intangible assets are considered such as the customer portfolio, brand, know-how or corporate reputationwhich provide differential value.
Consideration of acquired vs. internally generated goodwill
A distinction must be made between the acquired goodwill in a sale and purchase or merger, which may be recognised for accounting purposes and amortised or impaired according to regulations, and the internally generated goodwill,which does not appear on balance sheets but is key to reflecting the company's real capacity to generate future profitability. A proper valuation of both allows a true and complete picture of the business to be obtained.
In which situations is the valuation of goodwill requested?
Transactions in the sale and purchase of businesses
The valuation of goodwill is key in sales and purchases, as it allows the real value of intangibles to be determined and a fair price to be set in the negotiation.
Mergers, demergers or corporate restructuring processes
In mergers, spin-offs or restructurings, valuing goodwill ensures a correct allocation of assets and reflects the future ability to generate profits.
Corporate disputes or legal proceedings
In disputes between shareholders or in commercial litigation, the objective valuation of goodwill serves as an impartial benchmark for the resolution of the proceedings.
Expert reports or accounting audits
Auditors and experts request this analysis to verify the reasonableness of the value of intangibles in balance sheets, providing transparency and accounting rigour.
Why trust Gesvalt to value your goodwill?
Experience in intangible and business valuation
Gesvalt has extensive experience in the valuation of intangible assets, brands and businesses, providing sector knowledge and technical rigour in each operation.
Methodology endorsed by regulators and auditors
We apply recognised methodologies aligned with international standards, which ensures the acceptance of our reports by regulators, auditors and investors.
Valid reports for accounting, legal and tax purposes.
Our team of experts has the main certifications and extensive experience in the valuation of goodwill that guarantee the validity of our reports, from their accounting registration to their use in legal or fiscal processes.
Most common businesses requesting goodwill
Pharmacies
Tobacconists
Taxi licences and UTC
Frequently asked questions on the valuation of goodwill
What is the difference between goodwill and intangible assets?
What is the difference between goodwill and intangible assets?
Goodwill is a collection of intangibles such as brand name, goodwill or reputation, while intangible assets are specific items such as patents, licences or software.
How does the age of the business affect its valuation?
How does the age of the business affect its valuation?
Age influences the valuation of goodwill as a solid track record, recurring customers and established reputation increase its market value.
Can the goodwill of a franchise be valued?
Can the goodwill of a franchise be valued?
Yes, the goodwill of a franchise can be valued by considering factors such as brand, customer network, location and the terms of the franchise agreement.
Is a goodwill valuation legally valid?
Is a goodwill valuation legally valid?
The valuation of goodwill is legally valid and can be presented in legal proceedings, audits or corporate disputes as an independent expert report.