The Value of Valuations

Why some fast-growing companies may be ideal takeover targets. Plus: Accounting snags at Stagecoach; AT&T and Tyco take impairment charges.

PwC’s “Trendsetter Barometer” interviewed CEOs of 407 product and service companies identified in the media as the fastest-growing U.S. businesses during the past five years. The surveyed companies range in size from approximately $5 million to $100 million in revenues.

Another Andersen Problem in Houston

Speaking of valuation woes: a U.K.-based transport company said there were “accounting irregularities” in its recently acquired U.S. business, according to The auditor for the Houston-based acquisition target? Arthur Andersen.

Management at Stagecoach said operating profits at its Coach USA division fell about 39 percent for the year ending June 30.

The report said that accounting irregularities at Coach USA played a part in a $628 million writedown incurred by Stagecoach after it acquired the bus company.

The problems at Coach USA came to light after an employee tip-off, according to the report.

“We were not happy when we bought Coach with the accounting that had gone on [before] our acquisition,” said Robert Speirs, Stagecoach’s acting nonexecutive chairman, according to

“We investigated further and we made relevant adjustments to bring their accounting in line with our own from the date that we acquired it,” he reportedly told “From that time, there were no accounting irregularities.”

More Goodwill Hunting

A pair of active acquirers during the 1990s admitted on Tuesday that they paid way too much money for a number of those deals.

As a result, they are taking substantial charges to write off a lot of the assets they bought.

Yesterday, management at AT&T said that, based on FAS 142 and current market values in the cable industry, it has recorded noncash asset impairment charges of $13.1 billion, after tax. (To read an exclusive interview with departing AT&T CFO Chuck Noski, see “Deconstructing AT&T,” in the current issue of CFO magazine.)

And management at embattled Tyco International—which doesn’t really need any more bad news right now—took substantial impairment charges as well.

The conglomerate recorded goodwill write-offs of $513 million, pretax, related to the impairment of goodwill at the Tyco Telecommunications and Tyco Engineered Products and Services businesses.

In addition, Tyco recorded $239 million of impairment charges, of which $125 million relates to intangibles associated with health-care businesses that have been exited. Nearly $105 million relates to software development projects at ADT, which have been cancelled.

Tyco CEO Dennis Kozlowski recently resigned from the company amid charges that he evaded paying taxes on paintings he bought. And yesterday, a published report quoted analysts who believe current CFO Mark Swartz will leave Tyco once a new CEO is named.

According to data supplied to by Mercer Human Resource Consulting, Swartz was the highest-paid CFO in the United States last year.


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