Home Awesome Walmart paid the most for goodwill, intangible assets

Walmart paid the most for goodwill, intangible assets


Walmart attributed 77% of Flipkart’s $24.1 billion in assets to intangibles and goodwill, highlighting the premium the US retail giant paid when it acquired a majority stake in the Indian ecommerce firm last year. In a March 28 filing with the US Security and Exchange Commission( SEC ), Walmart said$ 5 billion in Flipkart’s assets were intangibles while $13.6 billion was goodwill as part of its buy cost allocation workout, which it said was still preliminary due to certain taxation items.“The goodwill arising from the acquisition consists largely of expected synergies and economies of scale principally related to procurement and logistics and is not expected to be deductible for tax purposes, ” the company said in its filing.Out of Flipkart’s $24.1 billion in assets, only $2.2 billion was in money and cash equivalents and $2.8 billion in other current assets. Walmart also said that Flipkart had liabilities of $3.7 billion while $4.3 billion represented the non-controlling 23% held during minority stakeholders. Walmart entered into a definitive agreement to buy a 77% stake in Flipkart for $16 billion in May last year, with the bargain being closed in August once the Bentonville, Arkansas-headquartered retailer received the necessary regulatory approvals.In the filing, Walmart added that Flipkart constituted approximately 2% of its total assets as of January 31, after omitting goodwill and intangibles, and 1% of its net marketings for the year ended that date.Crucial Deal for US RetailerWhile the goodwill and intangibles assigned to Flipkart’s assets are high, experts said it stimulated sense given the growth potential of the Indian market. Furthermore, acquiring Flipkart was critical for Walmart to get a foothold in India’s retail marketplace, something it had failed to do for over a decade.“There has been a trend where some of these big global players pay more for goodwill in bargains like this. Even while Flipkart is bleeding, for Walmart the long-term objective is to get access to the Indian market and Indian customers, ” said Salman Warris, managing partner at TechLegis Advocates& Solicitors. 6864006 2

In this context, the goodwill accounted for$ 9 billion of Amazon’s acquisition of Whole Foods, or roughly 70% of the $13 billion acquisition price paid by the US online retail giant, as per its disclosures. Of the buy price, 30% was for tangible assets such as stores and business relationships, while the rest was largely down to potential for future growth, experts said. Walmart maintained that Flipkart’s operations negatively impacted its net income in fiscal 2019 and will continue to have the same effect in the next year. The market’s initial reaction to the US retailer’s buy of Flipkart had been negative, Morgan Stanley said in a report last month.“As investors gained consolation in Flipkart’s ability to maintain rapid top-line growth while not incurring greater than expected losses, this discount largely dissipated, ” the brokerage had said. “Now that Flipkart’s loss will likely rise, it once again becomes a bigger part of the Walmart investment narrative.”

Read more: economictimes.indiatimes.com


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