- IRC 409A Regulations
- ASC 718 / FAS123R Stock Compensation
- ASC 805 / FAS141R Business Combinations
- ASC 350 / FAS142 Goodwill and Other Intangibles
- Transaction Fairness Opinions
As required by the Internal Revenue Code, Section 409A, privately owned companies must demonstrate that stock options are not being issued with an exercise price below fair market value at the time granted, or potentially face tax liabilities for both the company and the stock option recipient. To significantly decrease the potential for this liability, companies may rely upon an independent IRC 409A valuation from a qualified valuation firm to determine the fair market value of the options granted. This type of valuation is typically completed prior to the grant of options, and IRS guidelines indicate that updates to the valuation should be performed no less frequently than once every 12 months, or more frequently if company-specific circumstances indicate an increase in the market value of the company that had not been contemplated in the original valuation.
According to financial reporting standards (ASC 718/SFAS 123R), companies must expense stock options and other forms of equity based employee compensation. These standards include requirements that companies are to determine the basis for the value of the equity (for private companies, typically this will be an independent valuation conducted in accordance with IRC Section 409A), track equity compensation activity, calculate the fair value of the stock option expense to the company, and adjust employee income tax deductions. In some cases, the ongoing administration and compliance with this standard can pose a significant burden. Whitehawk Advisory has significant experience in determining the value of these securities, as well as performing the ASC 718 calculations, and frequently works with clients to determine options expense calculation following the completion of a 409A valuation.
Following the completion of an acquisition, the buyer must account for the assets acquired and liabilities assumed. The process involves identifying and valuing each of the tangible and intangible assets transferred to a buyer. We have significant experience in performing purchase price allocations under FASB ASC 805 (SFAS 141R) on behalf of middle market technology companies.
Subsequent to an acquisition, the buyer is required to periodically reexamine the value of goodwill acquired through a two-step process to test for and subsequently measure the impairment of goodwill. Obtaining an independent valuation of intangible assets to satisfy financial reporting requirements can insure compliance and also be an effective way to increase financial management efficiency following an acquisition.
We help management, boards of directors, and special committees to fulfill their fiduciary responsibilities — providing them with unbiased opinions supported by comprehensive analyses regarding the financial fairness of pending transactions. Our financial expertise and transaction experience are supplemented by independent judgment, and enable us to act as a trusted advisor for a diverse group of middle-market clients.
We have experience valuing companies and their underlying securities in nearly all types of change-of-control transactions, and have provided fairness opinions in all of the following circumstances:
- Affiliate and insider transactions
- Mergers/recapitalizations involving hybrid consideration
- Related-party transactions
- Synergistic mergers
- Transactions involving competing offers
- Down-round financing
Whitehawk Advisory professionals have delivered well over 150 financial advisory engagements to emerging growth companies across a diverse set of industries and stages of development. Following is an abbreviated list of selected historical clients: