Valuations 409A Practice Group
Valuing a company is neither a simple activity nor a one-time event. Every private company throughout its lifecycle will develop a series of valuations for a variety of reasons. It is important to create a strategy by which you determine the approach and process needed for valuing the company now and into the future. Each business represents a unique set of challenges and requires knowledgeable and experienced professionals who can apply both science and art to the valuation process.
This Practice Group has strong working knowledge of the various methods for determining business values that can be employed and can provide the necessary expertise and guidance. Our valuation experts are proficient with the IRS requirements under IRC Section 409A as well as the AICPA suggested best practices. The practice group also advises companies on how to manage activities leading up to a valuation including the preparation of budgets/forecasts, business plans, and strategic plans.
Ed O’Dea joined CFOs2GO in 2009 after a successful 35 year career in a variety of industries. He brings extensive knowledge as a working CFO, as well as a board member, of numerous private companies and applies his insights and in-depth understanding of the valuation methodology to the intricate valuation process. The valuation concepts and techniques he employs enable him to value businesses for funding purposes and guiding Boards in setting grant prices for stock options.
Who We Serve
Privately held companies are required to seek valuations for a variety of business situations in order to comply with tax and financial accounting standards. For instance, companies and grantees face significant tax liabilities and penalties if stock options are issued at less than fair market value. As a result, companies either considering or currently issuing stock options should consider an independent IRC 409A valuation annually and more frequently. Other compliance concerns that required valuations include ASC 718 / FAS 123R stock compensation or ASC 350 / FAS 142 Goodwill and Other Intangibles.
The owners of many private family-owned and operated companies have found that the recent changes in the gifting rules for tax purposes, with expanded life time exemptions, make it an interesting time to make ownership transfers to the next generation. One of the keys is a properly planned and executed business valuation so that the shares to be transferred can be correctly priced and compliant with IRC 2701 and 2702 on gift taxes.
Whether your company is adding new partners or shareholders, negotiating a buy-sell agreement, looking for investment capital or seeking acquisitions, you need expert guidance on developing a valuation. We work with companies in transition to determine a robust valuation strategy for the long-term such as ASC 805 / FAS 141R for Business Combinations or ASC 350 / FAS 142 for Goodwill and Other Intangibles as well as complete well-researched valuations for immediate needs.
CFOs2GO advises and assist companies seeking business valuation services by:
- Work with executive teams to identify the “drivers” of value using both traditional and industry specific methodologies
- Assist CFOs and executive teams prepare for and manage independent IRC valuations by other firms or individuals.
- Provide direction and support CFOs and executive teams in pricing common stock options to be granted at no less than fair market value.
- Complete independent valuations in accordance with IRC 409A regulations along with annual updates.
- Develop and execute business valuations for family-owned businesses shares to be transferred.
- Work with clients in establishing balanced approaches to buy/sell agreements.
- Complete independent valuations for gifting and estate planning purposes in accordance with IRC 2701 and 2702 Gift tax regulations.
- Complete independent valuations for merger or acquisition purposes in accordance with ASC 805 / FAS 141R for Business Combinations and ASC 350 / FAS 142 for Goodwill and Other Intangibles.
- Work with clients on valuations performed by other firms or individuals to understand terms, distinctions and valuation methods.
Successful Client Engagements
- Brought in by Board of Directors of high growth software as a service (SaaS) company to provide direction and support on the “drivers” of value prior to building their five year operating plan and considering outside investment.
- Brought in by the Board of Directors a Silicon Valley VC backed company to complete a 409A valuation to provide pricing guidance for the stock options to be issued.
- Completed independent valuation for private, family-owned company where the owners wanted to gift shares to children while taking advantage of attractive life time exemptions offered by the IRS.
- Completed independent valuation for a privately held (mostly family) company that wished to use the valuation to buy out many of the family members not involved with the company. We were able to provide a report that was understandable to all family members and most of them elected to sell some or all of their holdings.
- Advised and assisted the Board of Directors of a professional services firm on setting the buy-sell prices for new stakeholders and retiring (selling) shareholders. Since the firm was both the buyer and the seller, one of the keys to the “pricing” approach was “balance” so as to attract newer younger members of the professional group to invest as well as price the stock fairly for the selling shareholders.
- Provided guidance to management of a venture capital backed high-tech company when a valuation was performed by another firm resulting in more accurate pricing.
- Provided a valuation for a US subsidiary of a foreign based company that wished to allow a key manager to “buy” a significant stake in the subsidiary. This type of valuation requires careful consideration of the minority position of the new shareholder and the overall control aspects of the US Subsidiary.
- Completed independent valuation for $50.0M consulting firm as basis for transfer of shares in management succession plan from former owner-managers to new owner-managers.