Energy Transfer 2012 Annual Report Download - page 50

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We may not be able to fully execute our growth strategy if we encounter increased competition for qualified assets.
Our strategy contemplates growth through the development and acquisition of a wide range of midstream, transportation, storage,
and other energy infrastructure assets while maintaining a strong balance sheet. This strategy includes constructing and acquiring
additional assets and businesses to enhance our ability to compete effectively and diversify our asset portfolio, thereby providing
more stable cash flow. We regularly consider and enter into discussions regarding the acquisition of additional assets and businesses,
stand-alone development projects or other transactions that we believe will present opportunities to realize synergies and increase
our cash flow.
Consistent with our strategy, we may, from time to time, engage in discussions with potential sellers regarding the possible
acquisition of additional assets or businesses. Such acquisition efforts may involve our participation in processes that involve a
number of potential buyers, commonly referred to as “auction” processes, as well as situations in which we believe we are the
only party or one of a very limited number of potential buyers in negotiations with the potential seller. We cannot give assurance
that our acquisition efforts will be successful or that any acquisition will be completed on terms considered favorable to us.
In addition, we are experiencing increased competition for the assets we purchase or contemplate purchasing. Increased competition
for a limited pool of assets could result in us losing to other bidders more often or acquiring assets at higher prices, both of which
would limit our ability to fully execute our growth strategy. Inability to execute our growth strategy may materially adversely
impact our results of operations.
An impairment of goodwill and intangible assets could reduce our earnings.
As of December 31, 2012, our consolidated balance sheet reflected $5.61 billion of goodwill and $1.56 billion of intangible assets.
Goodwill is recorded when the purchase price of a business exceeds the fair value of the tangible and separately measurable
intangible net assets. Accounting principles generally accepted in the United States require us to test goodwill for impairment on
an annual basis or when events or circumstances occur, indicating that goodwill might be impaired. Long-lived assets such as
intangible assets with finite useful lives are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. If we determine that any of our goodwill or intangible assets were impaired, we
would be required to take an immediate charge to earnings with a correlative effect on partners’ capital and balance sheet leverage
as measured by debt to total capitalization.
If we do not make acquisitions on economically acceptable terms, our future growth could be limited.
Our results of operations and our ability to grow and to increase distributions to Unitholders will depend in part on our ability to
make acquisitions that are accretive to our distributable cash flow per unit.
We may be unable to make accretive acquisitions for any of the following reasons, among others:
• because we are unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with them;
• because we are unable to raise financing for such acquisitions on economically acceptable terms; or
• because we are outbid by competitors, some of which are substantially larger than us and have greater financial resources and
lower costs of capital then we do.
Furthermore, even if we consummate acquisitions that we believe will be accretive, those acquisitions may in fact adversely affect
our results of operations or result in a decrease in distributable cash flow per unit. Any acquisition involves potential risks, including
the risk that we may:
• fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements;
• decrease our liquidity by using a significant portion of our available cash or borrowing capacity to finance acquisitions;
• significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions;
• encounter difficulties operating in new geographic areas or new lines of business;
• incur or assume unanticipated liabilities, losses or costs associated with the business or assets acquired for which we are not
indemnified or for which the indemnity is inadequate;
• be unable to hire, train or retrain qualified personnel to manage and operate our growing business and assets;
• less effectively manage our historical assets, due to the diversion of management’s attention from other business concerns;
or
• incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring
charges.
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