Asset Purchase - Purchase Price Allocation (any tips?)

June 03, 2019
by a searcher from Harvard University - Harvard Business School in San Francisco, CA, USA
Any advice on what would be most advantageous allocation of purchase price to the buyer in an asset purchase? I'm primarily concerned about tax treatment, but if there are other considerations that should be on my radar, I'd love to hear. The business I'm looking at is a manufacturing business, with equipment, vehicles, and inventory. Thanks in advance.
from Harvard University in 1970 Walton Dr, Burlington, WA 98233, USA
You can build a model that shows the seller's pro forma tax benefit from a PPA that has a lower amount of physical property, versus your pro forma benefit from a higher basis in real property versus goodwill. In my case, I was able to negotiate a reduction in consulting fees by agreeing to a PPA breakout that was advantageous to the seller - we both came out ahead.
Unless the seller is fairly sophisticated, you will likely find that net working capital stated at close will need meaningful adjustments to capture labor in inventory, accrued commissions and discounts, etc.
I'm happy to discuss in more detail.
from Walsh College of Accountancy and Business Administration in Detroit, MI, USA