409A Valuation
A 409A valuation establishes the fair market value (FMV) of a private company’s common stock for option grants, ensuring compliance with U.S. tax regulations and guardrails for employee stock plan issuance. Without a proper 409A valuation, companies risk severe tax penalties on equity compensation.
At Synpact Consulting, we provide precise, defensible 409A valuations for U.S. startups, private companies, and cross-border ventures. Our analysis combines rigorous financial modeling, benchmarking, scenario planning, and documentation to satisfy audit and tax scrutiny.
Why Choose Synpact for 409A Valuation
- Regulatory Compliance & Tax Defensibility.
- Robust Valuation Methodologies (Option Pricing, Backsolve, Hybrid Methods).
- Full Documentation & Reporting suitable for IRS review.
- Scenario & Return Multiplicity Analysis (liquidation preferences, exit paths).
- Experienced in Private / Startup Contexts.
- Fast Turnaround for timely equity grants.
- Audit / Legal Support in case of IRS or investor queries.
Our 409A Valuation Services
Valuation Model Selection & Setup
Option pricing (e.g. Black-Scholes, Binomial, Monte Carlo).
Back‑solve / hybrid (for multi-class capital structures).
Discounted cash flow / comparables where relevant.
Capital Stack & Waterfall Analysis
Model preferred / debt / convertible / common relationships.
Scenario simulation of exit outcomes.
Allocation of residual value to common.
Assumption Benchmarking & Input Analysis
Volatility, risk-free rate, expected life, dividends, discount rate.
Market multiples and comparables.
Scenario weighting.
Option Price / FMV of Common Stock
Derivation of per‑share fair value.
Strike price setting and 409A safe harbor.
Stress, Upside, & Sensitivity Analysis
Sensitivities on key inputs.
Alternative outcome / downside vs upside scenarios.
Documentation & Legal / Audit Ready Report
Valuation report with methodology, assumptions, scenario outputs.
Supporting work papers, reconciliations.
Board memo, opinion letter for records.
Process & Workflow
- Engagement Kickoff – Gather cap table, financials, exit expectations, legal documents.
- Data Collection & Benchmarking – Peer multiples, transaction comps, volatility data.
- Model Building & Simulation – Build waterfall, option / back‑solve model.
- Review & Stress Testing – Run scenario sets, validate assumptions.
- Valuation Conclusion & Report – Final per‑share value, strike recommendation, report.
- Support & Follow-up – Legal / tax queries, board presentation, audits.
Industries & Use Cases
Industries:
- Tech / SaaS Startups
- Biotech / Healthcare Ventures
- FinTech & Financial Services
- Consumer & E‑commerce Startups
- Deep Tech / Hardware
Use Cases:
- Granting stock options to employees
- Pre‑Series A, B, C funding rounds
- Secondary share sales / liquidity events
- Audit readiness & investor documentation
- IRS or tax authority reviews
Frequently Asked Questions (FAQs)
Q: What is a 409A valuation and why is it needed?
A: A 409A valuation determines the fair market value (FMV) of private company common stock for option grants, ensuring compliance with U.S. tax code Section 409A.
Q: How long is a 409A valuation valid?
A: Typically, the safe harbor valuation is valid for 12 months, unless there is a material event (e.g. new financing, major acquisition) requiring re‑valuation.
Q: What inputs are most sensitive in 409A valuations?
A: Key sensitive inputs include volatility, discount rate, exit multiple, liquidity preferences, and timing of exit.
Q: Do you support multi‑class capital structures?
A: Yes — we model preferred, convertible instruments, debt, and common equity, with full waterfall / allocation logic.
Q: Is this suitable for non-U.S. companies granting U.S. options?
A: Yes — we can support 409A valuations for cross‑border entities, taking into account legal, tax, and structuring nuances.
Call to Action
Need a defensible 409A valuation for your startup or private company? Let Synpact Consulting help you set compliant option strike prices, protect your employees, and prepare strong audit/tax documentation. Contact info@synpactconsulting.com to schedule a consultation or request sample reports.