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Transaction Based Opinions
Fairness Opinions
In connection with change of control, going-private, management buyout, acquisition, PIPE, related party and other material transactions, a financial advisor is often retained to render an opinion to a board of directors (or a special committee of the board) regarding the fairness, from a financial point of view, of the transaction. Independent and unbiased fairness opinions provide directors (and other fiduciaries, such as trustees and general partners) with the objectivity they need to make informed decisions when contemplating these types of transactions. In addition, directors and other fiduciaries obtain fairness opinions because the failure to do so can subject them to potential liability for not properly fulfilling their legal duties to shareholders and other stakeholders.
However, not all fairness opinions are alike. A number of court cases have emphasized the importance of reliable, thorough and independent assessments of the fairness of a transaction from a financial point of view. As a result, the independence and reputation of the opinion provider, coupled with its detailed analysis and procedures (in contrast to an opinion with insufficient documentary support), is critical when allegations that an abuse of discretion occurred in approving a particular transaction.
The true value of a fairness opinion, then, is largely a function of the credentials and experience of the persons who may need to defend their client's decisions under the scrutiny of cross-examination. As such, two important questions should be asked when retaining a financial advisor to render a fairness opinion: (1) is the opinion provider truly independent, and (2) are the opinion provider's analytical capabilities, experience and academic credentials the best available for the particular transaction?
With respect to independence, The Salter Group has none of the inherent conflicts of an investment banking firm, and our unbiased advice therefore bypasses the shareholder, judicial and regulatory scrutiny which is common in situations where the opinion provider received a substantial contingent fee upon the closing of the transaction. For these reasons, and because of the current economic and litigious environment, more lawyers are advising boards of directors to obtain an objective and conflict-free fairness opinion (whether as an independent "stand-alone" or "secondary" opinion) which is not prepared by the investment bank which was retained to negotiate, structure and close, and also provide a fairness opinion regarding, a particular transaction. The Salter Group's objective and unbiased fairness opinions therefore provide greater comfort to boards of directors, independent committees, other fiduciaries and the legal advisors involved in any transaction.
With respect to capabilities, experience and credentials, The Salter Group has distinguished itself as one of the leading independent financial and strategic advisory firms with specialties in business and intangible asset valuations, financial opinions, valuations, economic analysis, forecasting, strategic planning and transaction support. We have extensive experience in (1) developing forecasts for companies, business segments or subsidiaries in disposition and other transactions, (2) assessing a target company's forecasts in M&A and secured lending transactions, and (3) performing assessments of a company's economic potential and viability based on a range of risk/return characteristics in equity investment and financing transactions. This experience enhances the value of our analyses and opinions.
In addition, lawyers and clients with a heightened sensitivity to other unique conflict situations (such as M&A transactions in which a private equity fund reserves an ownership stake for existing management or the transaction requirements involving SPAC's) will also benefit from our expertise in forecasting and modeling future results and valuing assets and companies under alternative transaction scenarios.
By having professionals with the requisite combination of "academic expert witness" credentials and real world transactional experience, The Salter Group is well-positioned to defend the fairness opinions we render to boards of directors, independent committees and other fiduciaries.
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Solvency and other Capital Adequacy Opinions
In connection with a leveraged or other material transaction, a financial advisor may be asked to render an opinion regarding the solvency or capital adequacy of a company and, more importantly, to be prepared to defend its opinion in the event of a subsequent bankruptcy or other legal proceeding in which it is alleged that the transaction constituted a fraudulent conveyance.
A successful claim of a fraudulent conveyance can result in a number of unanticipated or unfavorable results, such as secured creditors losing their collateral and the company's board of directors incurring personal liability for certain debts of the company.
A solvency or capital adequacy opinion reflects a financial advisor's opinion that the company will not be rendered insolvent as a result of the proposed transaction. Typically, the supporting financial and valuation analyses underlying these opinions focus on the following three "tests" (on a pro forma basis as of the consummation of the transaction):
- Whether the company's liabilities would exceed the fair value of its assets (the so-called "balance sheet test");
- Whether the company should have sufficient cash to meet its liabilities as they become due (the so-called "cash flow test"); and
- Whether the company would have sufficient capital to fund its ongoing business operations (the so-called "reasonable capital test").
The fact that an independent financial advisor rendered a favorable opinion for solvency or capital adequacy may mitigate the risk of a later fraudulent conveyance claim and serve as a critical component of defense against any such claims by providing evidence that the transaction participants acted reasonably and fulfilled their fiduciary and other duties to avoid entering into a transaction constituting a fraudulent conveyance.
However, the true value of these financial opinions is largely a function of the credentials and experience of the persons who may need to defend their client's decisions under the scrutiny of cross-examination.
The Salter Group has distinguished itself as one of the leading independent financial and strategic advisory firms with specialties in business and intangible asset valuations, financial opinions, economic analysis, forecasting, strategic planning and transaction support. We are known for our strong capabilities in assessing and developing asset and business forecasts, providing valuation indications under differing assumptions and developing integrated financial models that enable comprehensive capital structure analyses and transaction execution.
As such, our extensive experience in (i) developing forecasts for companies, business segments or subsidiaries in disposition and other transactions, (ii) assessing a target company's forecasts in M&A and secured lending transactions, and (iii) performing assessments of a company's economic potential and viability based on a range of risk/return characteristics in equity investment transactions enhances the value of our analyses and opinions in any situation where a transaction participant seeks greater comfort than what is often provided by competing firms (e.g., running a subject company's projections through a model without also assessing the reasonableness of the material assumptions underlying the company's forecasted results). We believe that the essence of "reliance" is best obtained by engaging the services of professionals with the requisite combination of expert witness credentials and real world transactional experience. The Salter Group is therefore unique in its approach to provide meaningful solvency or capital adequacy opinions to our clients.
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Collateral Valuation Opinions
The Salter Group is a preeminent global provider of collateral valuation opinions for the entertainment & media industries, the life science and health care industries, telecom and media-technologies industries and industrial and consumer companies ranging from energy and waste management to transportation services, textiles and consumer goods and services.
Increasingly, institutional lenders such as commercial banks, private-equity funds and hedge funds require credible independent valuation opinions and advice to provide support for prospective credit facilities, particularly in industries with concentrations in intellectual property ("IP").
As institutional lenders rely substantially on the integrity of collateral valuations, a high level of due diligence is required to enable lenders to believe (i) that forecasted cash flows can pay interest-bearing debt-obligations as they mature and (ii) that the saleable value of the collateral meets or exceeds the amounts owing as part of an orderly liquidation process.
With extensive financial opinion experience in over 650 financial advisory assignments representing over $70 billion in value, strong credibility among Wall Street institutions, and complete independence and objectivity by virtue of no inherent conflicts, The Salter Group possesses strong credibility as a collateral valuation opinion provider on behalf of capital providers including commercial banks, private equity funds, hedge funds and investment banks; as well as companies in the Entertainment & Media, Life Sciences & Health Care, Communications and Media-technology and the diversified industries we cover.
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Intellectual Property and Intangible Asset Valuation Opinions
Having pioneered the development of forecast and valuation methods in areas involving complex intellectual property ("IP") rights and securities for entertainment and media IP; life-science IP for specialty pharmaceutical, biotechnology, medical devices and related technologies; and telecommunications and new-media technologies. The Salter Group is renowned for our integrity in the accuracy, thoroughness, industry expertise and practical reliability of our analytics and associated collateral valuation support.
The Salter Group values a broad range of IP including the following:
- Contracts - Rights to cash receipts associated with various contracts including licensing rights, trademarks and trade name usage, and related contractual claims.
- Customers - Rights associated with measurable customers levels.
- Technology - Rights to cash receipts associated with various technologies including patents to software and proprietary technologies, trade secrets, software and related technologies.
The Salter Group has developed a variety of proprietary IP forecast and valuation methods used to develop valuation indications that are heavily relied upon by many accounting firms, Wall Street capital providers, investment banks and commercial businesses for a wide range of applications including transaction based financial opinions including collateral valuations, fairness opinions, solvency opinions, tax based financial opinions and financial reporting opinions (i.e. purchase price allocations and SFAS 142 impairment testing).
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Going Concern Valuation Opinions
Companies often require independent valuations for numerous reasons: mergers, acquisitions, going public, redemption of shareholders' interests; configure buy/sell equity incentives; structure ESOPs; and reorganizations of businesses. The Salter Group's ability to understand and determine the value of a company has been a keystone to our expertise since its founding. With an array of analytical tools, transaction experience and unfettered objectivity, we have the ability to forecast, value and determine a Company's worth in any marketplace setting.
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