How is machinery valued in an M&A purchase price allocation?
At fair market value in continued use. IRC 1060 requires the purchase price to be allocated across asset classes at fair market value and reported consistently by buyer and seller on Form 8594, and that allocated equipment value becomes the buyer's depreciable basis. Mismatched or unsupported equipment allocations are a known IRS examination trigger.
Why do buyers and sellers cite different equipment numbers in the same deal?
Usually a premise fight: sellers point to replacement cost or installed fair market value including freight and setup, while buyers and their lenders rely on auction comparables or orderly liquidation expectations. Switching premise can move machinery values 25 to 50 percent, which is why the appraisal must tie its opinion to a stated standard and premise.
What does deal-grade equipment documentation look like?
A fixed asset register reconciled to serial numbers and VINs, titles and lien records, lease agreements, hours and mileage, maintenance logs, photos, and condition inspections, reported under USPAP Standards 7 and 8 with an effective date tied to the transaction. That record supports both the allocation and the buyer's ability to perfect security interests.
Can equipment value be assumed inside enterprise value?
Only at the buyer's risk. Private-company deals often price the platform as a whole while implicitly assuming functional, owned equipment at normal fair market value; missing, obsolete, over-aged, or leased assets erode that assumption. An explicit equipment appraisal before closing verifies the operating base the multiple was paid for.