Letters of Intent, Sales, and the Effects on Estate/Gift Tax Valuations
At some point, the valuation analyst will come across the situation where the company to be valued has received a letter of intent (LOI). The issue in this circumstance is the weight that must be given to the value within such letter. This usually depends upon the particular circumstances and this analysis therefore requires considerable factual inquiry. There are three scenarios that the analyst will come across: the first is when the offer is rejected or the deal otherwise falls through; the second is if a sale occurs; and the third is if the deal is somewhere in between. It is the last circumstance that is the hardest to handle. Book-ending it are the two other options, which provide a frame of reference for the analyst and so we will address them first. The Sale Falls Through If the offer in the LOI is rejected by either party or the deal otherwise falls through, the valuation analyst can disregard the value within the LOI. The a...