Companies have dug deep in their pockets to buy other companies recently, raising the risk that they’ve overpaid. If true, investors will suffer. Companies would be forced to “write down” their goodwill, an asset on financial statements that represents the premiums paid in deals, and the losses would cut into earnings.
Here are some big acquisitions that didn’t pan out, and the billions of dollars lost:
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AOL buys Time Warner
Price: $106 billion, 2000
Write-down: $45.5 billion, 2002
At the time, the goodwill write-down led to the largest annual loss for a U.S. company
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Sprint buys Nextel
Price: $36 billion, 2005
Write-down: $30 billion, 2008
One of the biggest write-downs of goodwill ever as Sprint struggles with the wireless business
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Microsoft buys aQuantive
Price: $6.3 billion, 2007
Write-down: $6.2 billion, 2012
Nearly all of the purchase price is written down, an admission that Microsoft wildly overestimated the value of the online ad company
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Hewlett-Packard buys Autonomy
Price: $10 billion, 2011
Write-down: $8.8 billion, 2012
Deal blows up quickly amid allegations that Autonomy had misled HP about its sales
