Value Concepts

Buy/Sell
Acquisition/Divestiture
Joint Venture
Strategic Alliance
Licensing
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Introduction

Transactions involving all or part of a business entity are best
viewed as methods for owners and organizations to achieve
their strategic objectives.

As examples:

A sale may provide liquidity for the small business owner;
Joining with another company can complement both firms'
capabilities, enabling the combined entity to move successfully
through its next growth stage;
External pricing pressure can make it impossible for a firm to
thrive on its own core competency, necessitating some type of
business combination.

Acquisition, Divestiture, Joint Venture, Strategic Alliance are the more
dramatic forms of corporate development. Ideally, they all share the
objective of increased shareholder wealth. The strategic goals converge
with the wealth generation objectives. Divestiture can help streamline the
firm’s focus, so that it produces a better return to its redefined core activities.

When the necessary growth and development cannot occur through internal
means in a timely fashion, firms turn to "external" methods. It is our role to
help lubricate this process, to make it as friction-free as possible. Time and
energy spent in transaction and integration problems is simply wealth
consumed in non-productive activity. Although transactions are rarely simple,
reducing the non-productive costs enables more of these projects to achieve
long-term positive results.

Careful examination of the feasibility of the transaction, with an eye toward
its strategic logic and long-term wealth generating potential, can produce a
more realistic go/no-go decision. True complementarity of combined assets,
including human, intellectual, and cultural assets, is the key to a
wealth-enhancing combination. Long-term client satisfaction is paramount
in our deliberations as a consultant in these matters.

A Few Purposes of Business Combinations:

As a way of participating in or initiating an industry restructuring.
Acquisition as a way of in-sourcing innovation.
For a small or young company, a way of achieving critical mass in
preparation for rapid growth and possible exit strategy.
Provide liquidity for founders or investors.
Align your company's strengths with the complementary strengths
of a similar firm; shore up strategic weaknesses or vulnerabilities.

Services Offered:

Assist companies in assessing strategic viability of acquisition.
Represent selling company in traditional acquisitions, work for
either party in negotiating licensing agreements, joint venture,
strategic alliance.
Develop industry and market analysis for selling company;
prepare descriptive offering memorandum.
Find and qualify buyers; negotiate selling process.
Research alternate tax structures, perform due diligence.
Assist young technology companies in achieving equitable deal
with often intimidating larger buyers.

New FASB Rulings: SFAS 141 and 142

FASB 141 requires all business combinations initiated after June 30, 2001,
to be accounted for using the purchase method.

Under the new rules, an acquired intangible asset should be separately
recognized if the benefit of the intangible is obtained through contractual
or other legal rights, or if the intangible asset can be sold, transferred,
licensed, rented, or exchanged, regardless of the acquirer’s intent to do so.

These assets will be amortized over their useful lives (other than the few
assets that have an indefinite life), resulting in amortization expense.
Remaining useful life analysis promises to be a necessary, ongoing,
high-skill activity, now much more in demand than under the old rules.

There are legitimate concerns over whether the audit staff of many
accounting firms can easily or timely adjust to the technical demands of
the new FASB valuation requirements. In addition, consider the fact that
impairment testing and and valuation fall into the category of preparing
financial statements, not auditing them.

The classic relationship between management of a company and its
auditors is: Management prepares financial statements and
auditors attest to them. The potential for conflict of interest is clear.

We look forward to working with a company's management and its
auditors to assure service quality. We welcome contact from such firms.

Find more about FASB 141 and 142 here.

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