Refers both to the act of and the agreement to act on behalf of another party to protect them from losses, damages, or penalties. Often applies to exemption for the buyer from incurred penalties or liabilities after the closing from incomplete representations and warranties of seller.
The first offering of the common stock to the public of a closely held company.
Nonphysical resources or rights to other assets, including patents, goodwill, permits, and computer software, as examples.
An individual or institution who assists businesses who are trying to raise money through the offering of a company's stock. Investment banks also have a large role in facilitating mergers and acquisitions, private equity placements, and corporate restructuring. Typically, investment bankers represent companies with more than $10 million in revenue.
When the business is sold as an asset sale, the the IRS requires that the buyer and seller must use the same allocation of assets. Therefore, it is important that the buyer and seller negotiate allocation of the sales price to the various tangible and intangible assets of the sold entity.
A method to value a company by using historical transaction multiples which are then multiplied times a company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Taxes) to estimate a company's value. Rules of Thumbs can also be applied to other than EBITDA, such as a multiple times total revenue.
A transaction in which the sales prices paid in two or more installments over two or more years. If the sale meet certain requirements, taxpayer can postpone reporting any gain on an installment until the tax year proceeds are actually received.
An individual or small firm that acts as the agent for either a buyer seller of a company. An intermediary typically functions as a finder and only introduces the two parties to each other, but does not provide value added services like business valuations, structuring advice, negotiating the deal, or coordinating due diligence.
The value of a company as viewed by a specific investor. This investor may be a strategic investor, a member of the family, or a competitor looking to gain market share, as examples.
The revenue ruling 59-60 was issues by the IRS over 40 years ago and defines how to value the shares of capital stock of a closely-held corporation. Although commonly used for estate and gift tax calculations, it is also used for other litigation purposes. The ruling focuses on defining Fair Market Value, which is defined as "the priced at which the property would change hands between and willing buyer and a willing seller, when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, with both parties having reasonable knowledge of relevant fact."
The ruling then defined eight specific factors that should be considered in all valuations: