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Business Transactions
Purchase Price Allocation and 
Intangible Asset Impairment and Valuations
Purchase price allocation is the process of assigning fair values to all major assets and liabilities of an acquired enterprise following a business combination. For federal tax purposes, when assets are acquired in the purchase of a trade or business, the purchase price must be allocated to the underlying assets for purposes of determining depreciation and amortization allowance under the Internal Revenue Code. The actual allocation is requires a buyer and seller of a business to allocate the purchase price. Under this method, the buyer and the seller must use the residual method to allocate the purchase price. Purchase price allocation for financial accounting purposes has recently undergone significant and complex changes. Accounting Principles Board (APB) Opinion 16 and APB 17 have been superseded by Statement of Financial Accounting Standards, Accounting for Business Combinations, and SFAS 142, Accounting for Goodwill and Other Intangibles. Under SFAS 141 all business combinations must now be accounted for using the purchase method, based on the values of the assets exchanged. Under SFAS 142, goodwill and indefinite-lived intangibles are no longer amortized. Additionally, goodwill and other intangibles must now be tested annually for asset impairment at the reporting unit level and on an interim basis if an adverse triggering event takes place. Corporations that are planning a business combination should consider the effect of the transaction under the new rules and plan to carry out a thorough purchase price allocation accordingly. HSSK has the experience and expertise to ably and accurately navigate the myriad tax, accounting and valuation issues encountered in a complex purchase price allocation. HSSK has been built with professionalism at its cornerstone; we consistently maintain a level of conduct and performance that is commensurate with this professionalism.
Royalty Rate Valuation
HSSK performs royalty rate valuation analyses for our clients for use in licensing, valuation, litigation, intercompany transfer pricing, and the formation of IP holding companies and technology joint-ventures. Combining research of publicly available licensing information and private databases with analytical analyses of the economic benefit of the subject technology, HSSK can assist you in determining a reasonable royalty rate valuation for a wide range of technologies.
Fairness, Solvency Analysis and Due Diligence
Fairness opinions are usually required in merger and acquisition transactions where one or both parties may have a potential conflict of interest. An example of this is when a majority or control shareholder seeks to acquire the remainder of the outstanding shares of a company, often involving borrowing large sums of money secured by the assets of the company. A qualified firm experienced in transaction analysis can assist in guiding the fiduciary through an acquisition process. Another important application of valuation analysis is in the area of solvency (non-bankruptcy) or capital adequacy analysis. Often this involves analysis and assessment of the company's post transaction financial viability in a leveraged buyout transaction (LBO). The due diligence required in a solvency analysis often focuses on three major components: an analysis and/or valuation of the balance sheet; an analysis of the cash flow with an eye towards the repayment of debt in a LBO; an analysis of the capital base or equity cushion pre and post transaction. HSSK's financial, business, and valuation expertise enable us to be valuable members of the team in due diligence and solvency analysis.
Employee Stock Ownership Plans
An ESOP is a Qualified Plan under the Employees Retirement Income Security Act of 1974 (ERISA) which can be used to achieve a broad variety of different results. In addition to being a useful vehicle in aligning the interests of employees with those of the business' owners, it can be used to attain owners' goals in business succession planning, diversification of owners' assets, estate planning, property settlements in divorce or as an exit strategy. In many situations, substantial tax benefits can result from the use of an ESOP, including the deferral of recognizing gain recognition on the sale of stock. Valuations of companies for ESOP purposes require special considerations not present in the valuation of non-ESOP companies. In addition to possessing the skills and knowledge to perform the valuation, the appraiser must also be knowledgeable of ERISA and its related regulations. HSSK has in-house appraisers who are experts in the valuation of ESOP companies.