Case Study: Financial Opinion Services

Goodwill Impairment Opinion - Fair Value of Acquisition- Related Goodwill

Our Client

A public marketing and distribution company operating in the U.S.

Situation

The company entered into an agreement with a third party whereby (i) the third party contributed 100% of its domestic distribution rights in a portfolio of intellectual property rights into a newly-formed LLC, and (ii) the company contributed 100% of its operating assets into the LLC. The share of LLC ownership reflected on the company's financial statements was subject to annual goodwill impairment valuation tests.

Key Issues/Services

Assisting the company and its auditor in developing a framework for applying the appropriate FAS guidelines in order to prepare our findings
Understanding the basis for the company's recent erratic performance within the context of its competitive industry in order to evaluate and support the reasonableness of management's forecasts
Assisting management in developing varying levels of sensitized forecasts by giving consideration to key competitive characteristics of the LLC's assets and businesses
Reviewing both the company's base case and sensitized forecasts to determine fair value under FAS guidelines
Determining and assessing control- and minority-level fair value indications for the LLC's portfolio of businesses and assets within the context of a public company holding structure
Establishing consensus with the company's auditor to allow for the public disclosure of our independent findings

The Salter Group's Role & Outcome

We developed indications of control level values for the LLC, and adjusted such indications based upon the ownership structure, while giving consideration to appropriate discounts for a lack of control and liquidity/marketability.
We rendered an independent opinion of fair value of the acquisition-related goodwill for the company's use in connection with its public financial statement disclosures.

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