This whitepaper discusses several items we consider when appraising a business for estate planning purposes while a transaction process is underway. We review IRS commentary on consideration of potential transactions in business appraisals for transfer tax purposes. We then provide an overview of the various stages of an M&A process and discuss valuation considerations across each stage. We then review market evidence for success rates of announced deals, and several other factors that should be considered when determining the extent to which the expected proceeds from a potential deal should be considered. We finish with a discussion of the economics of deal proceeds.
Since a business often represents the majority of an owner’s wealth, it is common for owners to consider both exiting the business and engaging in estate planning at the same time.
Having a valuation specialist who is knowledgeable not only about IRS guidance on transfers during a transaction process, but also about the dynamics of the M&A process, the interpretation of deal terms and structures, the use of market evidence regarding deal success and failure rates, and the proper assessment of the economics of expected deal proceeds is imperative to avoid unintended consequences.
