Situation
This early stage Internet of Things (IoT) developer was rolling out its infrastructure as a significant milestone in launching its business. At this important phase, the executives wanted to issue stock options to attract talent and incentivize key employees.
The CFO reached out to Lou Pereira, President of Merrimack Business Appraisers, to have Pereira prepare 409A valuations. The CFO knew Pereira from a previous employer for whom Pereira had conducted 409A valuations.
Merrimack Business Appraisers’ Approach
Unlike many business appraisers who do not prepare 409A valuations, Pereira enjoys the nuances and challenges of working with early-stage companies having complex capital structures. In such situations, as was true for this IoT developer, the capital structure of the company was changing regularly as stock options were issued changing the number of stockholders and capital composition of the company. With varied, blended investments enabling the rapid growth, there is a level of complexity that makes the 409A valuations both interesting and challenging.
Each time the company issued stock options, which was multiple times in a year, Pereira would issue a comprehensive 409A valuation to reflect the latest capital structure and valuation of the issued stock options.
Valuation Outcome
This high-growth company was successful in attracting talent and incentivizing its key employees while being compliant with the tax authorities as Merrimack Business Appraisers prepared comprehensive 409A valuations as needed when stock options were issued.
When Values Matter.
