No. Few companies are worth their exact book value. Accounting a balance sheet in of itself does little to tell you the true value of the company. For example, Google's book value is roughly 100B while its market cap (the implied value of the company) is 360B. Why the discrepancy? Accounting rules are strict on how assets are valued and don't (nor are they meant) to represent the future cashflow that can be derived from them. Future growth, intellectual property and brands are basically not included in the book value. When a company gets acquired, this difference is made up through goodwill. This is simply a representation that book value is not a good measure of true value.
Actually, in the case of a change of control (e.g.: acquisition), you will recognize fair value for brands and other identifiable intangible assets on the balance sheet. The Goodwill becomes the remaining difference between the consideration (purchase price) and the FV of the net assets.
Funny thing is that I'm actually working on a purchase price allocation right now.
>> This makes its estimation implicitly data-starved, because with a DCF at leat you are getting a time series of independent measurements.
It isn't a data-starved number. It is often as simple as DCF calculation of value - the book value. DCF isn't used to calculate book value. Book value is simply the sum of the tangible parts.
Then goodwill isn't the right word for it, because goodwill has a precise definition that isn't fudged.
Additionally, the author made a good point in that many investors are not buying straight common shares. You can't simply value those shares by doing a DCF. You need to value each component of the instrument (an option, equity, debt,etc.) to get to a final number. He's right that extrapolating out that number is incorrect, but it's also incorrect to then deduce that anything beyond DCF is 'fudged'.
