Ready to go with the LOI and just read that a C-corp's asset sale is complicated as the step up and asset/goodwill valuation (and more obviously the double taxation) are tricky.
HBS guide only says "With C-corporations in the United States, for example, there are prohibitive taxes involved with asset purchases" and then later "If the seller organized their company as a C-corporation, you will probably not be able to effect a step-up, because the tax consequences to the seller are so unattractive that your purchase would no longer work for them."
Do you have any insights (or suggestions on where to read more) on this topic?
Hoping this doesn't ruin the deal!
Sending LOI and hitting snag as deal is asset sale from a C-corp
by an investor from University of Oxford
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What is the step-up that you are forgoing with buying stock instead of assets? Use this number to negotiate a lower purchase price to buy stock.
I worked with a Searcher several years ago that had this same issue and personal goodwill was not an option. She ended up negotiating a lower purchase price for the stock that exceeded the step-up that she was missing out on, so she ended up in a better spot. Now she was a self-funded, and she then made an S-election and this will avoid a similar issue when she exits 10+ years from now.
I have faced C Corp, sale many times over 35 years of M&A, often with top US tax attorneys. My software allows me to interactively quantify the tax impact to buyer, to seller or to both sitting in the same room with advisors.
If the target has reasonable assets (i.e. goodwill is low), the value impact to buyer of Stock is 5-15%. Both parties should know that RWI are stronger in Stock sale which seller may not like. Similarly, Stock may invite larger seller Note and/or earn-out.
Imo, C-Corp sale is slightly more challenging than S=Corp sale, but it is NOT "prohibitive" nor "tricky".
Under current taxes, a step up would impact S-Asset more than it would impact a C-Asset seller.