VALUATION

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“Property has no value unless there is a prospect that it can be exploited by human beings."

James Bonbright

Intangible Asset Appraisal


Catapult’s ability to identify and appraise intangible assets is supported by our Principal’s unique qualification in the valuation industry as a Patent Agent registered with the United States Patent and Trademark Office with over fifteen years of active practice.   Intangible Asset appraisals are performed independently or as part of a business valuation engagement, and include considerations of how the business’ rights, relationships, unidentified intangibles, and defined intellectual properties contribute to the benefit stream.

 

While the accounting profession maintains an uneasy relationship with intangible assets, our experience is to embrace the contribution intangibles make to a business by a focus on attributes of a business that create and maintain advantage. Of the different assets a business controls, intangibles carry the highest risk as well as reward. They hold value only when there is an expectation of earnings, and typically appear later in the development of a business.

Tax


The Internal Revenue Service (IRS) maintains a significant level of interest in the types and value of assets transferred to an acquirer of a controlling interest in a business. Catapult contributes to tax planning in a number of contexts. 

 

IRC §338. There are significant tax implications dependent upon whether the acquirer makes a Revenue Code §338 election, either §338(g), or §338(h)(10). Catapult’s contribution in an IRC §338(g) context is to identify and classify the various asset classes, including intangible assets. Our role can be expanded in an §338(h)(10) S-Corp election in the particular treatment of valuing pass-through entities.  

IRC §1202 For the founders of a privately held business a provision within IRC §1202 is particularly relevant on a personal level. It defines a (partial) exclusion from capital gains tax on the sale of stock. There are specific criteria to be met to qualify as a Qualified Small Business Stock.  Catapult’s contribution in an IRC §1202 context is to assist tax professionals in the determination of qualification.

IRC §409A & §2031. Whether it is a requirement to value the common stock of a business for deferred compensation under IRC §409A, or to value an interest in a closely held business in the context of a generational transfer or gift under IRC §2031, Catapult is capable of providing a defensible conclusion of value.

 

 

 

Litigation


The participants involved in resolving disputes through the legal system deal in facts, they operate via evidence-based decision making. In the business context of compensation for damages or recovering lost profits, the legal profession’s requirements for facts and evidence can be in opposition to the uncertainties of business. The valuation profession has responded by developing methods of valuing businesses, and assets using historical data – factual evidence. There are instances; however, where future projections are necessary. 


Damages & Lost Profits. Many disputes center around what could have been, but for the opposing side’s activities. Catapult’s contribution to a case is developing a successful defense of earnings projections in a consultant role.  We can also act as a testifying expert should the case describe earnings based primarily on intangible assets.

 

Bankruptcies & Restructures. Despite the increased level of sophistication of many in the judiciary and legal profession relating to business operations and the associated risks and rewards, the chairs in which they sit impart evidentiary-based constraints. What is the value of this company if assets A and B are combined and sold in a forced liquidation? What about assets A and C, but not B? What is the going concern value? Catapult is very well suited to contribute by developing case-specific options for obtaining appropriate value for the assets of a business in bankruptcy or restructuring in a consultant role.  We can also act as a testifying expert should the case describe earnings based primarily on intangible assets.

 

Value of Case in European Unified Patent Court (UPC). The UPC Preparatory Committee has provided Guidelines for the determination of Court fees and the ceiling of recoverable costs of the successful party.  The Guidance provides principles and suggested approaches for use in putting a value on the case at hand. Catapult is well suited to develop case value at different junctures.

 

Transactional

Whether obtaining resources, assets or capabilities, a closely held business is advised to support its ability create a level of earnings of the type, magnitude, and variability. The required negotiations will necessarily involve an assessment of the closely held business. Depending on the operating history of the closely held business, historical or projected earnings may be appropriate. Whether seeking a working capital loan, looking to buy a competitor, or seek a sale, Catapult can provide analysis, and indications of value at different levels of defensibility. 

 

Experience

Catapult has previous experience generating estimations of enterprise level value for closely held businesses as well as the appraisal of the intangible assets that underlie strategic valuations in multiple industries and verticals.

Manufacturing. Our industry experience includes pharmaceuticals, diagnostics, regulated devices, gases, and motors & generators.

Services. Our industry experience includes marketing analytics.

 
 
 
 
 

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