KPM and Associates - Commerical Work
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Commercial Case Study

Case Study

Troubled Debt Restructuring

The Situation
A fashion retail business falls upon tough times, resulting in negative working capital for the company with liabilities far exceeding assets. The management looks to KPM for tax and business advice as the company contemplates various alternatives.

KPM Business Idea at Work
KPM works with a turn-around specialist to determine the most appropriate trade debt to negotiate down. KPM advises management on the tax effects of the cancellation of debt under Section 108, and prepares future tax projections for the shareholders of the corporation, based on reaching certain forgiveness of debt targets. The company is able to equalize cash flow, reduce trade debt by $1 million and return to profitability within two years.

 

 


Valuation for Stock Purchase

The Situation
An established manufacturing company is owned by a sole shareholder. The shareholder is looking to sell a significant portion of his stock to the Director of Sales, who has been with the business for 20 years. The shareholder is looking to KPM to help determine the value of the business; provide a solution which will be most advantageous from a tax perspective, and that will allow the Director of Sales to afford the purchase.

KPM Business Idea at Work
KPM prepares a valuation report taking into account various methodologies accepted in the valuation industry. KPM then recommends a structure, based on its valuation work, that allows the shareholder to pay limited taxes and establishes a bonus plan that enables the Director of Sales to fund the purchase with future bonus paybacks.

 

 

 

Business Ownership Changes

The Situation
An editing company is looking to convert from a sole proprietor to an incorporated or partnership entity, and would like to admit a new owner. The company is looking to KPM to aid in designing the most advantageous structure to reward each party for the value they bring to the table, while at the same time limiting the tax effects of the transaction.

KPM Business Idea at Work
KPM recommends the formation of an LLC, with a preferred allocation to compensate certain parties. Further, KPM provides tax advice on the effects of capitalizing the LLC with certain tangible and intangible property.

 


Joint Venture

The Situation
A construction company is contemplating a joint venture with a wind energy development company to build wind engine turbines on various development sites. The company looks to KPM to provide a valuation approach and structure for the joint venture.

KPM Business Idea at Work
KPM assists the construction company in valuing the construction contracts contributed to the joint venture. Further, KPM develops a structure that allows the construction company owner to contribute certain intangibles to the joint venture and receive favorable tax treatment under an employment contract.

 

 


Audit and Financial Reporting Advice

The Situation
An environmental remediation company is merging with another environmental company and is looking to KPM to provide advice on the accounting for the merger and preparation of the consolidated audit.

KPM Business Idea at Work
KPM provides a comprehensive review of the purchase accounting, taking into account the various GAAP accounting pronouncements regarding business combinations. Additionally, KPM provides advice on the best approach for goodwill valuation and financial reporting related to the consolidated financial statements. KPM provides the annual audit and tax services for the combined entity.

 

 

 

 

Pension

The Situation
An established health care company is growing and nearing the employee target for a required audit of their pension plan. The company looks to KPM to better understand the audit requirements and to perform the audit services to accompany the 5500 filing.

KPM Business Idea at Work
KPM first walks the client through both the ERISA and DOL requirements for its audit. Based upon their assessment, KPM is able to prepare the annual pension audit in tandem with the client's third party administrator and investment manager.

 

 


Sale of Business

The Situation
The partners of a gaming company have received an offer to sell 100% of their membership interests to a public company. The partners look to KPM to evaluate the offer, provide support to the internal accounting staff during due diligence and provide tax and accounting advice on the structure of the transaction.

KPM Business Idea at Work
KPM prepares the pro forma, tax-effected benefits to the individual partners to help them better understand the existing offer. Upon due diligence, KPM assists the company with rolling up monthly financials from its various wholly owned subsidiaries. Lastly, KPM assists the partners in negotiating the structure of the membership interest purchase, maximizing capital treatment, deferring gains under the installment method and providing advice to one foreign partner on US taxation issues.

 

 

 

 

 

Projections and Cash Flow Management

The Situation
An Internet services business is contemplating a change in strategy and is considering debt financing to fund the change to its business model. Management looked to KPM to prepare cash flow projections in order to evaluate the strategy change and the debt burden needed.

KPM Business Idea at Work
KPM prepares several cash flow projection scenarios, taking into account various hiring plans, the anticipated debt financing and the results of operations from existing core business. Additionally, KPM develops management tools to determine cash flow requirements on an ongoing basis.

 

 

 

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Business Ideas at Work