Structuring the Deal: Asset Step-Ups, Noncompete, and Synergy Valuation Engines
The negotiated interests of the parties to the deal will provide the rationale for the deal structures utilized (taxable, tax deferred, and so forth, see Topic 84). The structures employed can lead to asset step-ups in tax basis and the use of noncompete arrangements, each of which requires appropriate valuation. In addition, synergy estimates also require valuation. Topic 85 explores these issues and how to value them in the context of determining total deal value.
The reader is encouraged to take the time to read the text in conjunction with the referenced Appendices to gain the appropriate level of understanding of the subject matter discussed in the narrative. Appendices are either presented at the end of this and each remaining Topic or are available for review and download on this book's companion Web site (see the About the Web Site page for login information).
VALUATION OF ASSET TAX BASIS STEP-UPS
- Buyers prefer to realize as large a tax deduction for the amount of their investment in a deal as early as possible.
- To do so, buyers must obtain as high a tax basis as possible in the most short-lived tax deductible assets acquired. One way to accomplish this is through structuring deals as asset or deemed asset purchases for tax purposes (see Topic 84), thus increasing the tax basis of assets acquired.
- Asset or deemed asset purchase structures allow the buyer to allocate the total of the ...