Financial Services

The pandemic has made life and business difficult for small business owners everywhere. The degree of difficulty varies significantly and depends primarily on the amount of physical proximity and interaction required in order for the business to be functional. Nobody signs up for these times, but there are a number of actionable steps business owners can take to build long-term customer loyalty, relationships and profitability. 1) If liquidity and short-term money is sufficient, business owners have an opportunity to focus on their longer term strategic planning. During “normal times” this activity is frequently postponed as day-to-day time-sensitive operations take priority.…
  In recent years, our team has seen an increasing number of valuation requests from general partners (“GPs”) of venture capital and private equity funds related to carried interest. For those unfamiliar, the carried interest is also referred to as “the profits interest” because it entitles the GP to a portion of the profits earned by the fund. There are a variety of reasons why a GP might want to have his or her carried interest valued: Wealth transfer planning, i.e. “gifting”, is a prominent one. The appeal of gifting future profits via the carried interest is two-fold: (1) First…
  Unlike public equity and fixed income fund managers, venture capital and private equity funds lack an active exchange to price the changing value of their investments. Instead, they perform valuations – oftentimes on a quarterly basis – so they can report updated values to their investors. This year, the disruption caused by the COVID-19 pandemic presented new challenges for valuation updates at a fund. First off, many of their investors are on edge. Who can blame them? It’s an election year, and they recently witnessed the public markets take a nosedive in March and bounce back in a euphoric…
Executive Summary Recent estate planning articles are full of speculation about potential tax changes related to the upcoming 2020 US election. Here is the one consensus piece of advice observed from numerous articles by reputable tax planners and professional advisors: Use your lifetime gift tax exclusion now if you can afford it. Making gifts of appreciating property, such as privately held stock and business interests, is a popular choice for tax and succession planning reasons. Introduction The results of this year’s national elections could have a big impact on tax planning depending which party wins the White House, the Senate,…
You Can’t Own Half a Stock, But You Can Own a Partial Note and Make Big Money Most homeowners do not own their homes free and clear. Those homeowners are making payments every month to somebody—and that somebody could be you. Most real estate investors assume they have to buy a property as their investment. But you can invest in mortgage notes—with much fewer headaches. One way to do that is with a partial note purchase. What are the Advantages of Owning Notes Instead of Properties? One of the best things about owning the note instead of the house is…
The coronavirus pandemic has created a period of extreme economic uncertainty. The truth is no one knows what economic conditions will be one month from today, let alone 6 to 12 months. While we would all like to believe that things will return to “normal” in the near future, that’s wishful thinking at best. Given the heightened uncertainty, one of the most critical priorities for companies is to accept the current environment as the “new normal,” which means having a financial strategy that will allow them to survive for the next 12-18 months. Central to that strategy is a detailed…
For more than 35 years, fairness opinions have played an integral role in merger and acquisition (M&A) and related corporate transactions. While fairness opinions were issued for deals prior to the mid-80s, the 1985 ruling in the Smith v. Van Gorkom case earned fairness opinions a much more prominent place in the deal process. Yet, the marketplace continues to struggle with a lack of consistent standards and methods where fairness opinions are concerned, as well as perceived conflicts of interest. This paper looks at the evolution of fairness opinions, the critical role they continue to play in supporting transaction value…
When the CARES Act was enacted, all the buzz from main street was about stimulus checks as well as PPP forgivable loans. Now that things have somewhat stabilized in the markets, there are two important changes related to the CARES Act that could immediately impact your business valuation. NOLs When the Tax Cut and Jobs Act (TCJA) first passed, it required us to modify our models because TCJA limited NOL usage to 80% of taxable income. Prior to this, you could fully use your NOL balance in any year. In other words, the TCJA lowered the valuation of the NOLs…
  What is the real cost of a 409A valuation? As startup-focused valuation providers, we often talk to founders and CFOs of early-stage companies who suggest a couple thousand dollars is sufficient to obtain a 409A valuation. While it may be true that’s a price quote from a low-cost automated provider, it’s rarely the real economic cost for the startup – or its team – when all is said and done. Nowadays, the story of highly capable executives foregoing cash compensation for potentially lucrative options grants is a familiar one. But what’s misunderstood is the other element that’s critical in…
  Executive Summary A Grantor Retained Annuity Trust (GRAT) is an irrevocable trust funded with a single contribution of assets that shifts future appreciation of assets to beneficiaries at a minimal gift tax cost. GRATs are uniquely attractive in a volatile market environment where declines in valuations can set investors up for returns in excess of the IRS’s assumed rate of return. GRATs work best when interest rates are low, which is currently the case due to aggressive monetary policy. To ensure the GRAT accomplishes its goal, a qualified appraisal of assets is undeniably important; in the absence of a…