Stock sales vs. asset sales: a proactive approach.

• Author: Brown, Marvin T.
• Position: Brief article

A common scenario for valuation analysts is one in which a potential client approaches us about performing a valuation related to a potential sale of his or her business. Usually, we respond by submitting a proposal that calls for a conclusion of value of a 100% interest in the common shares of the business. However, many clients ultimately sell their businesses via an asset sale basis.

We all know that the vast majority of U.S businesses are small or are in the lower middle market. Sales of most closely held businesses in these two categories are usually conducted via an asset sale transaction.

The Problem

Most clients are not familiar with converting values as determined by a stock sale to an asset sale basis, nor do they know how to do the conversion.

The Solution

We, as valuation analysts, do understand how to convert values from one basis to another, and can...