Appraisal Economics has valued a business in the process of being sold. We performed an analysis of the appropriate discount from a proposed transaction price to account for the time and uncertainty associated with the transaction being consummated as proposed, often referred to as “merger arbitrage.” A potential acquirer submitted a letter of intent to purchase a privately held company; however, there was substantial uncertainty whether the transaction would actually occur and, if so, what the ultimate price and terms would be after due diligence and final negotiations. Another consideration is how long shareholders of the target company would have to wait to realize the proceeds from a sale. To determine the fair market value of the company being sold shortly after the target company received a letter of intent, we performed research and analysis to determine the appropriate discount from the proposed transaction price. Appraisal Economics valued the subject interest for gift and estate tax planning purposes.
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