Situation
This company was founded by a young, entrepreneurial group who sought to make Wi-Fi accessible to people in a wide variety of locations. Wi-Fi was an emerging technology at the time, and this group had developed a model to roll out Wi-Fi access for public and nonpublic places including the billing model for the provider to charge for access.
Their industry model included hotel chains, airports, and shopping malls.
The founders had developed a thorough business plan including detailed financial forecasts and needed 409A business valuations as compensation packages included stock options to attract and retain talent. They were referred to Merrimack Business Appraisers to be their business valuation resource as needed to support their rapid growth.
Merrimack Business Appraisers’ Approach
Lou Pereira, a Certified Business Appraiser, of which there are fewer than 12 throughout New England, thoroughly enjoys developing 409A business valuations. As was the case with this company, the business is often an emerging business, on a fast track for growth that needs the 409A business valuation to incentivize top performers to join the business and be integral in its success. In this case, Wi-Fi was an emerging technology and the marketing opportunity for growth (as we now fully understand) was tremendous.
While some valuation professionals do not want the added scrutiny of the Department of Labor, Pereira applies his proven business valuation development process that presents how and why the business valuation was determined. He is confident in his work standing up to rigorous scrutiny including the IRS and in the case of 409A valuations, the Department of Labor.
Valuation Outcome
Lou Pereira developed multiple 409A business valuations for the leaders of this Wi-Fi business as they hired people, and the compensation package included stock options. Each 409A business valuation calculated the value of the business at the time and set the strike price of the stock options. In periods of rapid growth, Pereira prepared multiple valuations in a year and as growth rates settled down, annual 409A business valuations became the norm as stock options were an integral part of key performers’ compensation packages.
Learn more about 409A valuations.
When Values Matter.
