TRANSITION TALK

Ryan Grau CVA, CBA

Ryan Grau CVA, CBA
Ryan is VP of Business Valuation Services and a G2 Partner at FP Transitions. He is an industry authority on value and valuation for investment advisory, wealth management, and insurance-based practices and businesses. As the leader of the FPT Business Valuation Services team he works with business owners and their teams to perform appraisals and other analysis of their businesses to help them understand the drivers of value within their unique businesses and how it affects their overall strategy.

Recent Posts

Components of a Deal

Posted by Ryan Grau CVA, CBA on Jun 12, 2019 6:00:00 PM

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Whether you are buying or selling, it is important to understand what is being bought and sold and what expectations both the buyer and seller have of each other. Absent these details, it is difficult, if not impossible, to determine if an offer is fair. After all, “fair” is a relative term. The question of fairness would be easy to answer if all deals were done the same way, but the reality is they are not. Nonetheless, there are still common attributes to most deals that can shed light and aid in understanding the underlying terms. This in turn helps both buyer and seller assess the reasonability of an offer. 

WHAT IS BEING BOUGHT AND SOLD?

The sale of many, if not most, financial service businesses are completed as asset sales as opposed to stock sales, where all ownership rights are transferred to a third party. In an asset-based sale, both buyer and seller receive more favorable tax treatment when compared to a stock sale. Since financial services businesses are primarily relationship-based, providing mostly intangible services, what is being sold in an asset sale is rights to a future benefit stream—namely, revenues. However, given the intangible nature of the assets, there is no certainty that a buyer will receive the same amount of revenue from the clients as the seller did. This is why the ability to leverage the seller’s goodwill (the primary asset being bought and sold) to establish proper deal terms that create a shared risk, shared reward scenario become important. 

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Topics: Business Value, Deal Structure, Buying & Selling, Trends in Transactions Study, Transactions

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