Deal Terms Effect Selling Price

Structuring a Transaction to increase after-tax valuations:
• Seller financing over a longer term can increase the purchase price.
• Longer term loan amortization permits a higher price. Have business acquisition loan pre-qualified by lenders before buyer looks at business. Give the buyer those lenders (all other terms being equal) with the longest amortization period.
• Often the Seller’s CPA does not allow asset step-up to avoid higher tax on depreciation recapture…the price goes down
• Deal restructuring to consulting payments (with a 5 year payout) instead from goodwill (with a 15 year amortization) will increase the price. This may more than offset the added tax burden to the seller.
• Stock price is usually lower than Asset Price due to tax considerations (For the same balance sheet and assuming zero risk of unknown liabilities)
• A strategic buyer will pay a higher price if he is willing to pay for the synergies.

What factors effect selling price?
Terms other than all cash at closing:
Seller financing
Third party lenders
Earn outs
Extended employment

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