Purchase price allocations are an important part of negotiating a successful M&A transaction. The value of most assets — such as receivables, inventory and equipment — may be fairly straightforward. But the value of non-compete agreements is often a sticking point. To complicate matters, the buyer and seller may have conflicting tax objectives. This is because the buyer must amortize the amount allocated to non-competes over 15 years, whereas the seller must recognize the allocation as ordinary income. When the buyer and seller allocate different amounts to a non-compete agreement on their respective tax forms, they may trigger unwanted attention from the IRS. An objective business valuation professional can help the parties come to an agreement on the allocation amount before the deal closes. Factors to consider Under a...