Equipment appraisals for mergers and acquisitions.
An M&A equipment appraisal from Lukes & Lukes is an independent, USPAP-compliant opinion of Fair Market Value for the machinery and equipment changing hands in a deal. Built for buyers, sellers and their accountants to rely on, and prepared to withstand lender, SBA, IRS, audit and legal review.
At a glance
- What it is
- An independent, USPAP-compliant opinion of Fair Market Value for the machinery and equipment changing hands in a deal.
- Values reported
- Fair Market Value by asset, supporting the purchase price allocation. Installed, going-concern context for equipment that keeps running; in-exchange context for assets sold separately or relocated.
- Who orders it
- Buyers and sellers, private-equity and search-fund acquirers, CFOs and corporate development teams, and the accountants handling allocation and financial reporting.
- Buy side and sell side
- Both, worked the same way. The opinion is independent, not an advocacy value for either party.
- Deal financing
- OLV or NOLV for the lender can be prepared from the same inspection, as a separate conclusion.
- What the report gives you
- A written narrative of scope and methodology, an itemized appendix valuing each asset, and photographs from the inspection, with senior review before it leaves.
Which value applies
Which value applies when machinery changes hands in an acquisition?
The premise of value in an acquisition is Fair Market Value (FMV): the price a willing buyer and a willing seller agree on, neither under pressure, both informed. A certified appraiser determines FMV for the machinery in the transaction, then supports the purchase price allocation (PPA) that ties the deal price to the assets on the closing balance sheet.
FMV also depends on what happens to the equipment after closing. When it keeps running in the same plant under the same operations, value reflects an installed, going-concern context. When assets will be sold separately or relocated, value reflects an in-exchange context. We state the premise and the assumptions in the report, so the value means one thing and holds that meaning under review. Every premise we use is defined on our process page.
- Fair Market Value (FMV): the transaction premise for the equipment in a purchase or sale
- Purchase price allocation (PPA): FMV by asset so the deal price ties to the closing balance sheet and financial reporting
- Going-concern context: value for assets that keep running in place, installed and operating
- In-exchange context: value for assets sold separately or relocated after the deal
- Replacement Cost New (RCN): the cost-approach baseline behind the conclusion, depreciated to current condition
- One reconciled opinion: cost, market and income approaches weighed to a single defensible value
Purchase price allocation
What is purchase price allocation, and how is machinery valued for it?
Purchase price allocation (PPA) spreads the price paid for a business across the assets acquired, and machinery and equipment is appraised asset by asset to support its share of that price. Two sets of rules govern the allocation.
- Financial reporting (ASC 805): in a business combination, ASC 805 requires the acquirer to recognize the identifiable assets acquired at their acquisition-date fair value, as ASC 820 defines fair value. The equipment line on the opening balance sheet comes from that measurement.
- Tax (Internal Revenue Code section 1060): in an acquisition of the assets of a trade or business, the buyer and the seller each file IRS Form 8594 and allocate the price by the residual method. The Form 8594 instructions place furniture and fixtures, vehicles and equipment in Class V; goodwill and going concern value take the residual in Class VII.
The appraisal delivers the machinery and equipment value by asset, effective on the closing date, and states which definition of value it applies: fair value for ASC 805 reporting, fair market value for the tax allocation. The accountant builds the allocation from that schedule.
Machinery appraisal for purchase price allocation, in detail →
Where this connects
What other appraisals does an acquisition need?
The lender financing the purchase needs a collateral value, and a sale tied to an estate or a tax matter calls for the same FMV discipline. Here is the related work a deal tends to involve.
Who orders it
Who orders an M&A equipment appraisal?
Buyers and sellers order an M&A equipment appraisal to price the assets in a deal. Private-equity and search-fund acquirers order one for buy-side diligence, to confirm what the machinery is actually worth before they commit. CFOs and corporate development teams order one for sell-side preparation and for the purchase price allocation. The accountants handling allocation and financial reporting order one to support the equipment line on the closing balance sheet. Every one of them needs a value that holds up under review.
What you get
What does the report give your accountant and auditor?
You receive a written narrative of scope and methodology, an itemized appendix valuing each asset, and photographs from the inspection. Independent and certified, with senior review before it leaves. Buy-side and sell-side engagements are worked the same way. An allocation built on the report traces back to the same method a year later.
- Cost, market and income approaches applied by a certified appraiser, not a database
- Itemized appendix, narrative and photographs in every report
- FMV by asset, structured to support purchase price allocation and financial reporting
- Independent senior review on every report
- Lender-fluent for deal financing: we write for the credit desk, so our report reads the way a lender needs it to
Common questions
Answers, up front.
How are machines valued in an acquisition?
On a Fair Market Value (FMV) basis: the price a willing buyer and a willing seller would agree on, neither under pressure. A certified appraiser then frames that value to the deal. When the equipment keeps running in place, value reflects a going-concern, installed context. When assets will be sold separately or relocated, value reflects an in-exchange context. The premise and assumptions are stated in the report so the conclusion means one thing.
What is purchase price allocation, and why does the equipment line need an appraisal?
Purchase price allocation (PPA) assigns the total deal price across the assets acquired, and the machinery and equipment line is one of them. An independent FMV appraisal supports that line item with documented methodology and an itemized appendix, so the allocation and the financial reporting behind it can be relied on by your accountant and stand up to audit and IRS review.
Do you handle both buy-side and sell-side appraisals?
Yes. On the buy side, the appraisal confirms what the equipment is worth before the buyer commits, which informs price, financing and diligence. On the sell side, it supports the asking price and gives the buyer a documented basis to trust. The standard is the same in both directions: an independent, USPAP-compliant opinion of value, not an advocacy value for one party.
Will my accountant or auditor be able to rely on the appraisal?
That is what it is built for. Reports are USPAP-compliant, prepared by a NEBB-certified Machinery & Equipment Appraiser (CMEA), and structured with FMV by asset, a written narrative and an itemized appendix, so the allocation maps directly into financial reporting. The file is built to withstand lender, SBA, IRS, audit and legal review.
Can the same appraisal support the financing for the acquisition?
The deal value and the collateral value answer different questions, so they are separate conclusions, but we can prepare both from one inspection. FMV supports the purchase and the allocation, while Orderly Liquidation Value (OLV) or Net Orderly Liquidation Value (NOLV) supports the lender financing the deal. Both are documented to the standard a credit officer expects.
The seller's equipment list does not match what is in the building. How is that handled?
The inspection governs. We inventory what is actually present, flag assets on the list that are not there, and flag assets there that are not on the list. Both directions matter in a deal. The missing ones change the allocation, and the unlisted ones are sometimes leased, consigned or owned by a third party rather than the seller's to convey.