Questor share tip: G4S has acquisition hangover However, it is closer to home where the really problematic issues actually lie. Questor has carried out an analysis of the more recent acquisition trail, to show that during the six-year period from the end of 2006, revenue increased by 86pc from £4.03bn to £7.5bn, and the majority of that growth was fuelled by acquisitions. When a company is purchased, something called goodwill and intangible assets are created on the balance sheet. Goodwill is the difference between the cash paid by the acquirer and the value of the tangible assets of a business such as property, sold by the sellers. If the profits generated by those acquisitions are falling then it could well be the case that the price paid was too high and the value attributed to goodwill and intangibles needs adjusting. In 2006 G4S had goodwill and intangible assets of £1.4bn on its balance sheet, and at the end of June 2013 the figure had grown to £2.27bn. The bulk of the increase, or £741m, was built up during a three-year period from 2007. The geographic split of that increased sum shows that 47pc of it came from Europe, 21pc from North America and 32pc from new markets. It appears to Questor that the majority of acquisitions were undertaken at the top of the market and in more mature lower growth markets. The SFO investigation into UK activities is a further concern for the valuation of assets in the business. The 2012 audited accounts show that a third of the security group's goodwill, or £706m, relates to assets in the UK. The largest constituent of that figure is the UK Care and Justice division that makes up £247m of the total, part of the division that is now under investigation over prisoner-tagging contracts with the Government. G4S has, during the past 10 years, borrowed to expand and seen shares near triple. However, the company is now facing a particularly difficult situation as it owes twice as much to the banks as the value of the assets on its balance sheet. It has net assets - total assets of the company less monies owed to creditors - of £1.04bn, or 74p per share. But the net debt - debt less available cash - after adjusting for the £348m equity raise and £100m in asset sales should be about £1.55bn, or 100p per share. Goodwill and intangible assets of £2.27bn, or 161p per share, are a major part of the assets at G4S. The company announced additional value of £30.5m, by disposing of a Norwegian security business and losing 400 jobs. However, those job losses represent less than 1pc of the 657,000 employees at the end of 2012. The security group is, meanwhile, putting on a brave face, flagging up a £5bn contract pipeline and expected organic revenue growth of between 5pc and 8pc a year. Questor remains uncomfortable about a 2013 earnings multiple of 14 times, falling to 12.4 times next year, given that future earnings, after asset sales, are so uncertain. The company is holding its dividend and raising money in the equity market to pay back its banks. There is also too much risk around the ongoing investigations and potential for future write-downs. G4S shares have underperformed the FTSE 100 by 7pc since we said "sell" at the end of August, and investors" money is safer elsewhere.