Analyst Considerations in the Valuation Reviewed by Momizat on . of a Tax Loss Target Company Acquisition This article summarizes the factors that acquirers—and their valuation and other financial advisers—should consider whe of a Tax Loss Target Company Acquisition This article summarizes the factors that acquirers—and their valuation and other financial advisers—should consider whe Rating: 0
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Analyst Considerations in the Valuation

of a Tax Loss Target Company Acquisition

This article summarizes the factors that acquirers—and their valuation and other financial advisers—should consider when structuring an M&A transaction that involves a target corporation with such income tax attributes.

Analyst Considerations in the Valuation of a Tax Loss Target Company Acquisition


Valuation analysts and other financial advisers (collectively, analysts) are often retained to advise acquisitive clients with regard to proposed merger and acquisition (M&A) transactions. Such analysts typically focus on the pricing and structuring of the proposed M&A transaction. However, these analysts are expected to work with—and to support—the acquirer’s accounting, taxation, legal, and other professional advisers, particularly in the assessment of the risks and expected returns of the proposed transaction. Accordingly, such analysts should at least be generally aware of some of the taxation considerations about the proposed M&A transaction.

Analysts should be aware that when one of the transaction participants involves a loss corporation (or a target company with certain other tax attributes), the Internal Revenue Service (Service) may allege that the principal purpose of the proposed transaction is to evade or avoid income taxes. Of course, the target entity’s tax attributes should not be ignored in the consideration of—and the pricing of—the proposed M&A transaction. However, the target entity’s tax attributes should not be the principal reason for the transaction.

Analysts should be prepared to assist the acquirer to defend against any Service challenge of the tax motivations for the proposed transaction. That is, analysts should be prepared to assist the acquirer to understand—and to document—the non-taxation-related economic benefits that are the primary reasons for—and the primary value drivers of—the proposed M&A transaction.

M&A announcements and completions continue at a brisk pace in many industries throughout the U.S. economy. This generally positive trend in M&A activity continues despite general concerns about COVID-19 as a national health issue and despite the negative impact of the pandemic on the national economy.

The typical reasons for M&A transactions in most industries remain the same, regardless of the national health impacts and the national economic effects of the COVID-19 pandemic. Some of the reasons for potential transaction participants to consider an M&A transaction include (1) the economies of scale and of size related to the combined entity, (2) the elimination of a competitor (due to the consolidation) resulting in geographic concentration, (3) the combination of different industry segment participants into a more diversified combined company, (4) the ability of the transaction acquirer to “buy” (acquire) business functions and capabilities at a lower cost than the cost to “make” (internally develop) business functions and capabilities, (5) the availability of low-interest-rate debt financing and of plentiful equity financing looking for investment opportunities, and (6) the availability of otherwise successful target companies that do not have other management/ownership succession options available to them.

Any combination of these post-M&A transaction economic benefit factors could lead to (1) the identification of an acquisition target company, (2) the negotiation and consummation of a successful M&A transaction, and (3) the creation of an integrated combined entity that is experiencing post-merger synergies, economies of scale, and other combined entity value enhancements.

Throughout the COVID-19 pandemic, many companies in many industry segments have remained quite successful. These companies have experienced increased revenue and increased profitability—and increased taxable income. Such financially successful companies are often attractive M&A target companies. Throughout this same COVID-19 pandemic, other companies have experienced operational problems, decreased revenue, and financial distress. These other companies have experienced decreased revenue and negative profitability—and tax-related net operating losses. In addition to their other attributes, the tax attributes (including the net operating loss [NOL] carryforwards) of these financially distressed companies may also make them attractive M&A target companies. In fact, the tax attributes of the “loss” companies may increase the attractiveness of—and may even enhance the acquisition value of—such M&A candidate companies to financially successful acquisitive companies.

Corporate acquirers—and their valuation and other financial advisors—should be careful when pricing and structuring the potential acquisition of M&A target corporations with NOL and certain other income tax attributes. Of course, the income tax attributes of such a loss target company are an important consideration in the pricing of any M&A transaction. And the income tax attributes of the potential target company are a component of the value of any potential target company. However, corporate acquirers and analysts should understand that the acquisition of the target company income tax benefits should not be the only (or even the primary) value driver in (or purpose of) the potential M&A transaction.

The Service may disallow the acquirer’s use of the target company NOL carryforward (or other income tax attributes) if the Service concludes that the M&A transaction was justified solely based on the value of such tax attributes. Corporate acquirers should consider this risk regarding the pricing and structuring of an M&A transaction involving a financially distressed target company. This discussion summarizes the factors that acquirers—and their valuation and other financial advisers—should consider when structuring an M&A transaction that involves a target corporation with such income tax attributes.

Section 269 and the Tax Loss Target Corporation

The Service often applies Internal Revenue Code Section 269 as the justification for disallowing tax attributes related to an M&A transaction that it decides was intended to evade or to avoid income tax. While the NOL of a target corporation can be used (with restrictions) to affect the taxable income of the acquirer, the Service will scrutinize any M&A transactions that is primarily motivated by what it believes to be tax avoidance.

First, the M&A transaction should be structured and economically justified to prevent the Service from disallowing the use of the target corporation’s tax attributes. Second, the acquirer should expect that the Service will limit the annual amount of any target company NOL benefits—through the application of Section 382. Section 382 restricts the combined entity’s use of the target company NOL carryforwards (and certain built-in losses) following a loss corporation ownership change transaction.

In addition, if the Service believes that the M&A transaction was primarily tax-motivated, then it may apply several other statutory provisions to restrict the transaction’s income tax benefits. Such statutory provisions are intended to disallow (or to recharacterize) the target corporation’s losses and other income tax attributes.

Acquisitions Principally Intended to Avoid or to Evade Income Tax

Section 269(a) provides the Service with the authority to disallow a deduction, a credit, or any other income tax benefit. The Service may disallow these income tax benefits if the benefits are obtained by a taxpayer (either a corporation or a person) that acquires control of a corporation for the principal purpose of avoiding or evading federal income tax.

The statutory language of Section 269 provides a specific definition of “control.” For purposes of Section 269, “control” means the ownership of the corporation stock possessing either (1) 50 percent of the combined total voting rights of all classes of stock that are entitled to vote or (2) at least 50 percent of the total value of the shares of all classes of stock. For this purpose, control may be acquired directly or indirectly. The direct acquisition of control typically occurs through a target company stock purchase or exchange. An indirect acquisition of control may occur, for example, if the taxpayer corporation itself redeems the shares of certain shareholders. That is because such a corporate stock redemption could leave a remaining shareholder with a controlling ownership interest.

The acquisition of control of the tax benefit corporation must occur for the Service to apply the Section 269 provisions. One example where a court rejected the Service’s application of Section 269 is Jackson Oldsmobile, Inc., 237 F. Supp 779 (M.D. GA 1964), aff’d, 371 F.2d 808 (Fifth Cir. 1967). In that judicial decision, the Fifth Circuit upheld the trial court’s ruling that there was an acquisition of nonvoting stock that represented less than 50 percent of the corporation’s value. The Fifth Circuit reached this conclusion because one shareholder had owned 100 percent of the corporation’s voting stock—both before and after the acquisition of the nonvoting stock.

It is noteworthy that voting stock ownership is not the only factor that the Service looks at to determine who has voting control of the target corporation. Of course, the percentage of voting common stock owned by the acquirer (either an individual or a corporation) is the first factor that the Service considers. However, sometimes there is evidence that other factors also influence who actually has operational control of the target corporation.

This issue (of de facto control versus voting stock ownership) was an important consideration in the Court of Federal Claims decision in Hermes Consol. Inc., 14 Cl. Ct. 398 (1988). In the Hermes decision, the Court of Federal Claims explained: “the ultimate expression of voting power is the ability to approve or disapprove of fundamental changes in the corporate structure, and the ability to elect the corporation’s board of directors.”

In addition, an acquirer (either an individual or a corporation) cannot transfer control from itself to itself. That is, for purposes of applying Section 269, the Service may not recognize an “acquisition” when the taxpayer simply revives its own dormant subsidiary corporation. This no-control-transfer result will occur even if the taxpayer uses the subsidiary corporation for a new purpose. This is because the ownership (and operational) control of the target corporation did not change hands. An example of this situation occurred in the Tax Court decision in The Challenger, Inc. (T.C. Memo. 1964-338). In that judicial decision, the Tax Court explained that control must be both relinquished and then reestablished for there to be a change of control.

Definition of Tax Avoidance as the Principal Transaction Purpose

Treasury Regulation 1.269-3(a) provides an explanation of the “principal purpose” requirement with respect to the proposed transaction. That is, tax avoidance becomes the principal purpose of the transaction if it “exceeds in importance any other purpose.” This Regulation language does not mean that tax avoidance has to be the only purpose (or economic justification) of the M&A transaction. But, according to this Section 269 regulation, tax avoidance does have to be the principal (or the primary) purpose of the M&A transaction.

In a taxpayer-friendly interpretation, some courts have interpreted “principal” purpose to mean that tax avoidance must be more important to the acquisition than all other purposes combined. That is, under such an interpretation, the tax avoidance purpose does not just have to be the single most important purpose. It must be more important than the summation of all other transaction motivation purposes. For example, see the Court of Federal Claims decision in U.S. Shelter Corp. 13 Cl. Ct. 606 (1987) and the Fifth Circuit decision in Bobsee Corp. 411 F.2d 231 (5th Cir. 1969).

Of course, there are numerous strategic and economic justifications for creating a new combined entity through an M&A transaction. These reasons include limiting the entity’s liability, increasing the combined debt capacity, increasing combined purchasing power, increasing the entity’s market concentration and penetration, gaining access to otherwise unavailable technology or intellectual property, and many other reasons. Income tax simplification and income tax reduction may also be valid economic justifications for an M&A transaction. However, evading or avoiding income tax cannot be the principal (or even the most important) economic justification for the M&A transaction.

Section 269 provides the Service with the authority to disallow tax benefits when a profitable corporation acquires a loss corporation for the sole purpose of utilizing the target company’s NOLs or other tax attributes. As described in the Sixth Circuit decision in The Zanesville Investment Co., 335 F.2d 507, 509 (6th Cir. 1964), the typical Section 269 controversies “have dealt with the sale by one control group to another of a corporation with, typically, a net operating loss carryforward and the efforts of the new control group to utilize this carryforward by funneling otherwise taxable income to a point of alleged confluence with the carryforward.”

Consideration of the Source of the NOLs

The Service may apply Section 269 to disallow the use of preacquisition NOLs and other tax attributes regardless of which party to the M&A transaction is the source of the income tax benefit. In other words, for Section 269 purposes, it does not matter whether the loss corporation is the target corporation or the acquirer corporation. The Service—and the courts—may still apply Section 269 to restrict the use of the preacquisition losses after an M&A transaction. See, for example, the Fifth Circuit decision in Supreme Investment Corp., 468 F.2d 370 (5th Cir. 1972).

The Service has made a few attempts to apply Section 269 to disallow post-acquisition losses that taxpayers have applied to the post-acquisition combined entity income. However, the courts have generally not accepted such an application of Section 269. For example, see the Third Circuit decision in Herculite Protective Fabrics Corp., 387 F.2d 475 (3rd Cir. 1968) and the Sixth Circuit decision in The Zanesville Investment Co. cited above.

Nonetheless, some courts have accepted the Service’s application of Section 269 on a post-acquisition basis. These cases all involved instances where the acquired corporation was consistently generating an operating loss. In these cases, the post-transaction combined company attempted to offset the acquirer company’s income against the acquired target company’s continuing losses. In other words, the courts concluded that the acquirer completed the acquisition to have access to (and enjoy the tax benefit of) the target corporation’s expected post-acquisition losses. For example, see the First Circuit decision in R.P. Collins & Co., 303 F2 142 (1st Cir. 1962) and the Third Circuit decision in Hall Paving Co., 471 F.2d 161, 262 (5th Cir. 1973).

In assessing whether target company tax attributes are the principal purpose of the transaction, the Service often considers both the preacquisition and the post-acquisition losses of the target company. If the target’s losses do not repeat every single year—but do occur with some regularity—then the Service may allege that the target corporation’s tax losses were the principal purpose of the price transaction.

The Service may also consider whether the acquirer (either an individual or a corporation) operates the loss target company differently after the acquisition. For example, let us assume that Connie Contractor owns the profitable Alpha Company (Alpha). Alpha is a water, sewer, and pipeline construction company. Connie acquires the stock of Beta Corporation (Beta). Beta is another water, sewer, and pipeline construction company—with a large NOL carryforward. The amount of Alpha’s income is not sufficient to fully benefit from the Beta NOL carryforward (even considering the effect of the Section 382 limitation).

Now, let us assume that Connie also owns Gamma Corporation (Gamma). Gamma is an unrelated—but profitable—highway and street construction company. Connie merges Gamma into Alpha—to have sufficient Alpha income to fully utilize the Beta NOL carryforward.

The Service may allege that the principal purpose of the Gamma merger was the evasion or the avoidance of income tax. The Service may then apply Section 269 to disallow Alpha’s utilization of the Beta NOL.

The Service has not been successful in applying Section 269 to block the mere deferral of income tax. In the Tax Court matter Rocco, 72 T.C. 150 (1979), the Service claimed that tax avoidance was the taxpayer’s principal purpose. The Service disallowed the taxpayer’s ability to use the cash method of accounting. The Tax Court rejected the Service’s position. In its judicial decision, the Tax Court stated that Section 269 applies to “deductions or credits, the allowance of which would result in a permanent reduction of revenue.” Rejecting the Service’s position, the Rocco court concluded that the government was “attempting to disallow a benefit which defers the tax but does not result ultimately in the avoidance or the evasion of tax.”

Consideration of Transaction Substance over Form

The redemption of a shareholder’s shares in a loss corporation may trigger Section 269 if the stock redemption puts another shareholder into a control position. In other words, the Service may treat such a stock redemption as if it was an acquisition of the loss target corporation. However, the Service’s application of Section 269 may not always prevail in such instances. For example, in the U.S. District Court decision in Younker Bros., Inc., 318 F. Supp 202 (S.D. Iowa 1970), the court concluded that nontax motivations were the principal purpose of a shareholder redemption. In the Younker Bros. case, the District Court rejected the Service’s application of Section 269.

In the Tax Court decision in Briarcliff Candy Corp., T.C. Memo 1987-487, the court made it clear that it would broadly consider substance over form in the application of Section 269. The Briarcliff Candy decision states that Section 269 was “broadly drafted to include any type of acquisition which constitutes a device by which one corporation secures a tax benefit to which it is not otherwise entitled.” In that judicial decision, the Tax Court accepted the Service’s application of Section 269 with respect to a loss acquirer corporation’s purchase of a profitable subsidiary corporation.

The takeaway to corporate acquirers is that neither the Service nor the courts will limit the application of Section 269 to the “plain vanilla” M&A transaction where a profitable acquirer corporation buys a target corporation with an NOL carryforward.

The Application of Section 269 to a New Corporation

Occasionally, the Service may attempt to apply Section 269 after the taxpayer’s formation of a new corporate entity. According to Regulation 1.269-3(b)(3), Section 269 may apply when an individual owns high-income assets and then transfers those assets to a newly formed controlled corporation that generally produces NOLs.

One example of the application of Section 269 to a new corporation involved the musician and comedian Victor Borge. For years, Borge earned a substantial amount of income from his musical comedy entertainment appearances. Totally unrelated to his work as an entertainer, Borge also owned an unincorporated poultry business that consistently generated operating losses. However, the tax law limited the annual amount of the unincorporated business losses that Borge could apply to offset his considerable entertainment income. So Borge incorporated the poultry business. And he contracted through the new (unprofitable) corporation to provide his (profitable) entertainment services.

The Service applied Section 269 to disallow the offset of the new corporation’s losses against the Borge’s entertainment-related income. Borge challenged the Service’s application of Section 269 and brought the case to trial. At appeal, the Second Circuit decision in Borge, 405 F.2d 673 (2d Cir. 1968) agreed with the Service. The Second Circuit held that the new corporation was formed for the primary purpose of providing an income tax benefit to Borge, and the Appeals court applied Section 269 to deny the income offset by the corporation’s operating losses.

Normally, the Service applies Section 269 when a taxpayer utilizes a corporate form to enjoy income tax benefits from either built-in or pre-existing circumstances. The most typical example of this circumstance is when a target corporation has an available NOL carryforward. However, the Service may also apply Section 269 when the taxpayer creates a new corporation around an existing business for the principal purpose of obtaining income tax benefits.

Of course, the Service will not apply Section 269 to disallow tax benefits when there are alternative (non-tax-related) purposes for the formation of the corporate entity. In particular, the courts often consider these other, non-tax-related reasons for the corporate formation. For example, the Tax Court decision in Cromwell Corp., 437 T.C. 313, 320-21 (1964) states: “the formation of a holding company to acquire another corporation is not a universal procedure and is not a ‘device’ which would distort the income of … the principals … as comprehended by Section 269.”

The S Corporation Exception to Section 269

According to Revenue Ruling 76-363, Section 269 cannot be applied to disallow any deduction, credit, or other tax allowance of a corporation that has elected to be taxed under Subchapter S. Under the Section 1366 rules for S corporations, such small business corporations pass through income, gains, loses, and deductions to the company shareholders. Accordingly, and practically, Section 269 will not apply to limit an S corporation’s deductions, credits, or other tax allowances.

In addition to Revenue Ruling 76-363, the courts have recognized that the tax pass-through status of an S corporation effectively negates the application of Section 269 to disallow income tax benefits at the corporation level. For example, in the Tax Court matter of Modern Home Fire & Casualty Insurance Co., the Service alleged that the principal purpose of the shareholder’s use of the S corporation was to offset losses against the corporation’s income. The Tax Court’s Modern Home decision concluded that, even if the Service’s allegation was correct (which the court did not need to rule on), Section 269 would not apply to an S corporation.

The Section 382 Limitation on NOL Use

Section 269 is intended to limit tax avoidance or tax evasion related to the acquisition of a loss target company. In contrast, Section 382 is intended to limit the acquirer’s annual use of the acquired NOLs of a target company that has an NOL carryforward.

Sections 382(g) and (i) describe the test for when the Section 382 NOL limitation is triggered. The Section 382 NOL limitation applies after there is an “ownership change” in the loss target corporation. Such an ownership change occurs if the percentage of corporate stock owned by any 5 percent shareholder increases by more than 50 percentage points over the lowest stock percentage owned by that shareholder. The look-back period for the testing of the 50-percentage point ownership change is three years.

An ownership change occurs when the loss target corporation is acquired in either a taxable purchase or a tax-free reorganization. A taxable purchase may involve an asset purchase accounted for under Section 1060. A tax-free reorganization may involve any of the reorganization structures accounted for under Section 368(a)(1)(A) or (C) or (D).

The annual amount of the pre-change NOL available to the acquirer is calculated as (1) the fair market value of the target loss corporation at the time of the ownership change multiplied by (2) the applicable federal long-term tax-exempt rate. Section 382(k)(1) defines a loss target corporation as a corporation (1) that is entitled to use an NOL carryback or carryforward or (2) that has an NOL for the current tax year in which the ownership change occurred.

A loss target corporation also includes any corporation with a “net realized built-in loss.” According to Section 382(h)(3)(A), a corporation will have a net unrealized built-in loss if (1) the aggregate adjusted basis of the corporation’s assets exceeds (2) the aggregate fair market value of the corporation’s assets. This comparison is made just prior to the date of the ownership change that triggers Section 382.

Section 382(h)(1)(B) provides the limitation on the acquirer’s use of the target corporation’s net unrealized built-in loss. That limitation is described as follows: the acquirer corporation treats the net unrealized built-in loss as a pre-ownership change loss that can offset post-change income only to the extent of the above-described Section 382 annual limitation.

Section 382(h)(2)(B) provides that a recognized built-in loss is any loss recognized on the disposition of an asset during a five-year period. That five-year period begins on the ownership change date. The amount of the recognized built-in loss that is treated as a pre-change loss is limited to the amount of the net unrealized built-in loss.

The Service’s Other Potential Challenges to M&A Transactions

The Service may also challenge the income tax motivations behind an M&A transaction by applying other tax provisions and doctrines. For example, the Service may challenge the M&A transaction under the Section 482 (and the related regulations) intercompany transfer price rules. The Service may also challenge the tax impact of the M&A transaction under several non-statutory legal doctrines. For example, the Service may attempt to recharacterize the M&A transaction based on the principle of economic substance, the principle of substance over form, the principle of a sham transaction, or the principle of a step transaction.

The M&A transaction should be safe from a Service challenge under the business-purpose legal doctrine if the transaction is shown to be motivated by a valid business purpose—other than tax avoidance or tax evasion.

Proposed M&A Transaction Planning Considerations

There is little that a corporate acquirer can do to avoid the application of the Section 382 limitation on the annual use of the acquired loss corporation’s NOLs. However, there are numerous factors that a corporate acquirer may consider to avoid (or to successfully defend against) the Service’s application of Section 269 in an M&A transaction. The transaction participant’s analyst—and other financial advisers—may assist in the development of—and the documentation of—these considerations.

The owners/managers of the acquirer corporation (and the owners/managers of both corporations, in the case of a merger transaction) should seriously contemplate—and carefully document—the following considerations:

  1. The acquirer company should have a written acquisition plan that is approved by its board of directors. In the case of a merger, both companies should have a written merger plan that is approved by their respective boards of directors. This written transaction plan (or plans) should thoroughly document (and quantify, if possible) all of the nontaxation reasons for completing the proposed M&A transaction.
  2. To the extent that there are both taxation reasons and nontaxation reasons for the M&A transaction, the written plan (or plans) should make clear that the nontaxation reasons are the principal reasons for the proposed transaction. The nontaxation reasons may include industry, strategic, and operational considerations. These nontaxation considerations should be described so as to make it obvious that they are the principal transaction drivers.
  3. Financial projections for the post-transaction entity should be included in the written plan (or plans). These financial projections should, of course, include any of the expected post-transaction income tax benefits—and all other post-transaction benefit considerations. However, the post-transaction financial projections should demonstrate that nontaxation factors—that is, operating income, post-merger synergies, economies of scale and size, etc.—are the principal components of the combined entity’s expected cash flow.
  4. If a profitable entity is acquiring or merging with a loss entity, then the post-transaction business plan should demonstrate how the transaction will “turn around” (or make profitable) the business operations that were previously operating at a loss. If the target corporation’s operating loss is expected to be temporary or is due to extraordinary circumstances (e.g., the temporary impact of the COVID-19 pandemic), then those factors should be described in the post-transaction business plan.
  5. A corporation acquiring (or merging with) a target company in a different line of business should describe the business (i.e., nontaxation) reasons for the M&A transaction. There are numerous valid business purposes for such consolidation transactions, including planned product/service/geography) diversification, access to financing collateral, access to new lines of distribution, reduction of any seasonality effects, access to intellectual property or to business licenses, and so on. All such nontaxation reasons should be discussed in the written M&A transaction plan (or plans).
  6. If possible, the transaction participants may ask the analysts to quantify their nontaxation reasons for the proposed transaction. The purpose of this exercise would be to demonstrate that these nontaxation economic benefits present the largest component of the proposed transaction purchase price. Such an analysis could demonstrate that the value of the nontaxation acquisition considerations substantially exceed the value of the taxation acquisition considerations.

Including all the above considerations in a written acquisition plan, business plan, strategic plan, and financial projection will provide contemporaneous evidence of the business purposes and reasons for the proposed M&A transaction. The analyst should explain to the transaction participants that such contemporaneous evidence may be very important for future use in the acquirer’s defense against any Service challenge of the completed transaction.

Summary and Conclusion

M&A activity continues at a brisk level in many industries throughout the economy. It is uncertain whether this positive trend in M&A activity is occurring despite the COVID-19 impacted economic conditions or because of the COVID-19 impacted economic conditions. Either way, participants in many industries may be faced with M&A pricing and structuring considerations—either as the acquirer entity or as the target entity.

Transaction participants—and their valuation and other financial advisers—understand that income tax considerations are an important element in the planning and pricing of any M&A transaction. However, both participants and analysts should understand that income tax considerations should not be the principal motivation or purpose of the proposed M&A transaction. If tax considerations are the principal transactional purpose, then the Service may allege that the transaction is intended to avoid or to evade federal income tax. Particularly if there is a loss corporation as one of the transaction participants, the Service may attempt to apply Section 269 (or some other statutory or judicial provisions) to restrict or disallow the income tax benefits of the proposed transaction.

Accordingly, transaction participants—and their valuation and other financial advisers—should carefully plan for any M&A transaction involving a loss target corporation or other related income tax benefits. Such transaction planning should include the impact of the Section 382 limitation on the acquirer’s annual use of acquired loss corporation’s NOLs. And analysts can assist the transaction participants with the written documentation of all of the nontaxation reasons for—and drivers of—the proposed M&A transaction.

Robert Reilly, CPA, ASA, ABC, CVA, CFF, CMA, is Managing Director of Willamette Management Associate’ Chicago offices. His practice includes business valuation, forensic analysis, and financial opinion services.

Mr. Reilly has performed the following types of valuation and economic analyses: economic event analyses, merger and acquisition valuations, divestiture and spin-off valuations, solvency and insolvency analyses, fairness and adequacy opinions, reasonably equivalent value analyses, ESOP formation and adequate consideration analyses, private inurement/excess benefit/intermediate sanctions opinions, acquisition purchase accounting allocations, reasonableness of compensation analyses, restructuring and reorganization analyses, tangible property/intangible property intercompany transfer price analyses, and lost profits/reasonable royalty/cost to cure economic damages analyses.

Mr. Reilly has prepared these valuation and economic analyses for the following purposes: transaction pricing and structuring (merger, acquisition, liquidation, and divestiture); taxation planning and compliance (federal income, gift, estate, and generation-skipping tax; state and local property tax; transfer tax); financing securitization and collateralization; employee corporate ownership (ESOP employer stock transaction and compliance valuations); forensic analysis and dispute resolution; strategic planning and management information; bankruptcy and reorganization (recapitalization, reorganization, restructuring); financial accounting and public reporting; and regulatory compliance and corporate governance. 

Mr. Reilly can be contacted at (773) 399-4318 or by e-mail to

The National Association of Certified Valuators and Analysts (NACVA) supports the users of business and intangible asset valuation services and financial forensic services, including damages determinations of all kinds and fraud detection and prevention, by training and certifying financial professionals in these disciplines.

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