Situation: A client had entered into an agreement to purchase an existing business before getting any advice. We thought
the business price was too high, but it was too late to re-negotiate the sales price.
Solution: We looked at the assets that were being purchased, including the lease, to get the purchase price allocated over depreciable assets rather than classified as non-depreciable business goodwill. The vendor didn’t want to renew the lease but did agree to reduce the purchase price.
Result: Even though there was a signed sale & purchase agreement in place, the vendor reduced the price of the business by $60,000 (about 20 %!). That meant our client, the purchaser, didn’t have to borrow anywhere near as much and also had a much better chance of getting a decent return on their investment in the business.
Situation: At the time of a business purchase only legal advice had been obtained and the Shareholders Agreement had
conflicting clauses (from an accounting and tax perspective) that did not work and would not result in the desired outcome.
Solution: Make sure you take advice at the start and make sure you involve all your advisors in the process. Two (or more) heads approaching an issue for different perspectives always come up with a more robust solution.
Result: Unwinding a transaction cost incurred legal fees of $100,000 and because it took over 2 years to complete the profitability of the business suffered significantly.
Situation: The client had purchased a highly successful services business with a great customer base and products. Most of
the purchase price was for intangible assets, with the only tangible assets being some office equipment.
Solution: We undertook an assessment of what generated the revenue for the company, reviewed the agreements that were in place for the tools that were used in the delivery of services, and determined the value that could be ascribed to depreciable intangible assets.
Result: A tax saving of $300,000 over 4 years.