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When acquiring a company, you either buy the STOCK or buy the ASSETS (stock deal or asset deal).
Why does it matter?
💲💲Cash flow 💲💲
This 🧵is summary of what I've learned doing #smallbusienss stock/asset deals. Ignoring this topic can be...painful (beware).
Why does it matter?
💲💲Cash flow 💲💲
This 🧵is summary of what I've learned doing #smallbusienss stock/asset deals. Ignoring this topic can be...painful (beware).
Goodwill = value of business in excess of the stated tangible net assets on the balance sheet
The seller has probably depreciated the heck out of the balance sheet assets (the net asset amount is low)
If you buy the stock, you have to step into that low asset basis (Bad!)
The seller has probably depreciated the heck out of the balance sheet assets (the net asset amount is low)
If you buy the stock, you have to step into that low asset basis (Bad!)
Asset purchase you can:
1. 'Step up' the basis of the acquired assets (basically taking that old piece of equipment and telling the IRS it's new again!)
2. Amortize goodwill over 15 years (more amort expense = lower taxes)
1. 'Step up' the basis of the acquired assets (basically taking that old piece of equipment and telling the IRS it's new again!)
2. Amortize goodwill over 15 years (more amort expense = lower taxes)
