• Achille Ekeu, MBA, CVA

Goodwill is defined by the International Glossary of business Valuation Terms as "that intangible asset arising as a result of name, reputation, customer loyalty, location, products, and similar factor not separately identified". There are three components that cause Goodwill to exist:

  • (a) The existence of assets in place and ready to use. This element is sometimes referred to the going-concern value element of goodwill.

  • (b) The second component of goodwill is the existence of excess economic income. This is the excess income generated by an enterprise that is not attributable to other tangible and intagible assets.

  • (c) The third component is the expectation of future events that are not directly related to the current operation of the business.

Accountants Definition of Goodwill

Under General Accepted Accounting Principles (GAAP), the goodwill that a business enterprise develops is rarely on the financial statements of the business. Goodwill is recorded on the books and records of the acquired business only if the acquisition qualifies under the purchase accounting rules. For accountants, goodwill represents the total value of the business enterprise (purchase price) less the fair market value of the business enterprise tangible real and personal assets.

Economists Definition of Goodwill

The economists interpretattion of goodwill is less global than the accountants interpretation. The economists define goodwill as the capitalization of all the economic income from a business enterprise that can not be associated with any other asset (tangible or intangible) of the business. Economic income could be net cash flow, before or after business debt service, net income before or after taxes; net operating income; and so forth. The important consideration is that in the economic income capitalization process, the capitalization rate used should be consistent with the definition of economic income used.

Reasons to Analyze the Goodwill Intangible

  1. Damage Analyses

  2. Business or Professional Practice Merger

  3. Business or Professional Practice Separation

  4. Solvency Test

  5. Insolvency Test

  6. Transfer Price

  7. Bankruptcy and Reorganization

  8. Conversion of a C Corporation to an S Corporation

  9. Business Enterprise Valuation

  10. Deprivation Analysis

  11. Ownership Allocation Litigation

  12. Ad Valorem Property Taxation

Common Valuation Methods

The cost approach, the market approach and the income approach methods are all applicable to the valuation and economic analysis of goodwill intangibles.

Cost Approach: Using this approach, the analyst estimates the amount of current cost required to recreate the elements of the subject goodwill intangible. The component build-up method is the most common method that consists of: (a) list all of the individual components of the subject goodwill, (b) estimate the amount of cost required to recreate each component.

Market Approach: There are two common market approach methods:

  • the first estimates the value of goodwill as the residual from the purchase price of the actual sale of the subject business enterprise.

  • the second method estimates the value of goodwill based upon an analysis of actual guideline sales transactions.

Goodwill intangibles are rarely sold totally separately from other assets, so guideline sales transactions usually involve the sale of going-concern businesses or professional practices.

Income Approach: The three most common income approach methods are:

  • Residual from busines enterprise value method

  • Capitalized excess economic income method

  • Present value of future economic events method

Each of these methods is based upon the concept of goodwill representing the expectation of some future economic benefit.

In Divorce Cases

Goodwill in divorce proceedings is handled differently depending on various jurisdictions. There are two different types of goodwill: Professional and Personal goodwill. The issue is whether or not personal goodwill should be included as marital assets to be divided among the two parties. In some jusridictions, courts always include goodwill as a divisible marital asset, regardless of the nature of the goodwill. Many states, however, differentiate between "enterprise goodwill" (entity goodwill), which is considered to be divisible marital asset, and "personal goodwill", which is not.


Goodwill is an intangible that needs to be identified , analyzed and valued using the appropriate methods.

Achille Ekeu, MBA, CVA

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The distinction between a merger, an acquisition, a divestiture, and other types of restructurings warrants some clarification. Transactions can come in a multitude of forms, can be a hybrid of several classifications, or in new markets can create a brand new classification all together. Often some of the definitions are used interchangeably or are categorized differently.

There has really been no set standard for these definitions, but we will attempt to simplify and clarify ahead. It is important to understand these core structures to better classify any individual transaction explored.

Merger: A merger is fundamentally the combination of two or more business entities in which only one entity remains. The firms are typically similar in size. (Company A + Company B = Company A).

Consolidation: A consolidation is a combination of more than one business entity; however, an entirely new entity is created. (Company A + Company B = Company C).

Acquisition: An acquisition is the purchase of a business entity, entities, an asset, or assets. Although often used interchangeably, an acquisition differs from a merger in that the acquiring company (the acquirer) is typically significantly larger than the asset or entity being purchased (the target). Acquisitions can take several forms, including the following:

  • Acquisition of assets: An acquisition of assets is the purchase of an asset or group of assets, and the direct liabilities associated with those assets.

  • Acquisition of equity: An acquisition of equity is the purchase of equity interest in a business entity. The differences between an acquisition of assets and an acquisition of equity are important from a legal, regulatory, accounting, and modeling perspective.

  • Leveraged buyout: A leveraged buyout (LBO) is an acquisition using a significant amount of debt to meet the cost of acquisition.

  • Management buyout: A management buyout (MBO) is a form of acquisition where a company’s existing managers acquire a large part or all of the business entity. Acquisitions can be considered hostile or friendly, depending on the assertive nature of the process.

  • Friendly acquisition: An acquisition accomplished in agreement with the target company’s management and board of directors; a public offer of stock or cash for example is made by the acquiring firm, and the board of the target firm will publicly approve the terms.

  • Hostile acquisition: An acquisition that is accomplished not by coming to an agreement with the target company’s management or board of directors, but by going through other means to get acquisition approval, such as directly to the company’s shareholders; a tender offer, and a proxy fight are ways to solicit support from shareholders without direct approval from company management.

Mergers, consolidations, and acquisitions can be categorized further:

  • Horizontal: A horizontal transaction is between business entities within the same industry. Such a combination would potentially increase market share of a business in that particular industry.

  • Vertical: A vertical transaction is between business entities operating at different levels within an industry’s supply chain. Synergies created by merging such firms would benefit both. A good example is within the oil and gas industry. In the oil and gas industry, you have exploration and production (E&P) companies that drill for oil. Once oil is found, the wells are producing, and the energy is refined, distribution companies or pipeline companies transport the product to retail for access to the customer, such as a gas station. So in this example, an E&P company purchasing a pipeline company or a gas station would represent vertical integration—a vertical merger. In contrast, an E&P company purchasing another E&P company is a horizontal merger.

  • Conglomerate: A transaction between two or more unrelated business entities—entities that basically have no business activity in common; there are two major types of conglomerate transactions: pure and mixed. Pure conglomerate transactions involve business entities that are completely unrelated, while mixed conglomerate transactions involve firms that are looking for product extensions or market extensions.

Divestiture: A divestiture is the sale of an interest of a business entity, an asset, or group of assets. Divestitures can be delineated further:

  • Asset divestiture: An asset divestiture is the sale of an asset or group of assets.

  • Spin-off: A spin-off occurs when a parent company creates a separate entity and distributes shares in that entity to its shareholders as a dividend.

  • Equity carve-out: An equity carve-out occurs when a parent company sells a percentage of the equity of a subsidiary to the public. This is also known as a partial IPO.

Other restructurings: Mergers, consolidations, acquisitions, and divestitures can all be considered types of business restructurings as they all involve some level of reorganization aimed to increase business profitability. Although the foregoing are just major categories, other types of business restructurings can be considered to help fuel growth. A share buyback, for example, is when a company buys back shares in the open market. This creates an anti-dilutive effect, hopefully fueling an increase in company stock price. A workforce reduction is another example of a way to reduce costs and improve earnings performance.

Each of these strategies represents other restructuring ways aimed at improving business value.

Achille Ekeu, MBA, CVA

President & CEO

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Updated: Mar 22

The Minister of Secondary Education of Cameroon, Professor Nalova Lyonga Pauline, received The "Special ADEAN AWARD for Leadership, Excellence and Transparency in Management" by the Association of former students of ENSET ANNEXE of Nkolbisson, best known under the French acronym as ADEAN. The ceremony took place on Wednesday, 19 January 2022 at the Distance Education Centre in Yaounde.

Achille Ekeu, the President and CEO of The Washington Valuation Group is the Founder & Chairman of The ADEAN AWARDS program that he created in 2017 in Washington as part of the employee engagement and retention program he offers in his consulting firm to businesses with high attrition rates. This annual AWARDS program focuses on recognizing people in organizations at every level for their accomplishments and devotion to their professions. It also encourages and rewards people who go above and beyond their call of duty to publish a book, create a company to provide jobs to unemployed people, pursue and obtain a Doctorate Degree, and give back to their communities through caritative actions of significance.

During the official ceremony, Pr. Nalova Lyonga Pauline was represented by the Secretary-General of her Ministry, Pr. Fabien Nkot, with all the leaders and stakeholders of the Education family of Cameroon present to witness this Special AWARD ceremony. In Cameroon, the Chairman was represented by a delegation of four former honorees, under the leadership of Ajah Peter Tamasang, assisted by Simon Mairo, Laurence Tchantchou, and Fritz Bell. The Chairman, Achille Ekeu delivered a powerful and strong speech through zoom from Washington during this solemn ceremony. He mentioned that the organizing committee based on public data and facts obtained on the ground decided to offer this Special Award to the Minister of Secondary Education for her actions taken to improve the educational system in Cameroon.

As a reminder, Achille Ekeu is a US citizen of Cameroonian descent, resident of Maryland who graduated in 1992 from ENSET Annex of Nkolbisson in Yaounde, the Capital of Cameroon with a Bachelor's Degree in Mechanical Engineering and a Technical High School Teaching Degree (DIPET1). ENSET is a High School Teachers and Engineering School that is part of the University of Douala, previously known as the University Center of Douala.

For more about this special event, here is the link to the Ministry of Secondary Education's press release. Click Here!

To watch the video of the event, click here.

Here are some pictures of the Special ADEAN Award Ceremony.

From left to right: Ajah Peter Tamasang (Delegation Leader), Simon Mairo, Chairman Achille Ekeu, SG Fabien Nkot, a view of the education leadership of Cameroon, Laurence Tchantchou giving the Special Award to the SG Fabien Nkot, representing the Minister of Secondary Education; and the family picture of the participants at the Award ceremony.

Thank You!

Achille Ekeu, MBA, CVA

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