Understanding, analyzing, identifying, and defining value is the foundation of Madison Street Capital and represents our core expertise. Our experienced professionals draw on the most sophisticated analytical tools and financial modeling techniques available anywhere, then augment this resource with first-person transaction experience to determine a precise and objective enterprise value. We assist clients seeking to determine corporate worth for all types of environments and situations including:
- Initial Public Offerings (IPOs)
- Mergers & Acquisitions
- Shareholder redemptions
- Tax liability determinations
- Succession plans and reorganizations of family-owned enterprises
- Collateral value assessments
- International transactions
- Employee Stock Ownership Plans (ESOPs)
- Convertible and debt securities
- Stock Options
Independent 3rd Party Fairness Opinions
Certain business transactions require an extra element of diligence and care based on complexity, independence, and many other factors. When a transaction will result in a change in control, and/or a significant change to a company’s capital structure, those entrusted with fiduciary responsibility are wise to seek additional assurance as a protective measure to ensure the terms of the deal, from a financial point of view, are fair.
Madison Street Capital provides fairness opinions both on a stand-alone basis, and in support of a broader financial advisory engagement. We deliver robust analyses that provide fiduciaries such as boards of directors, special committees, management, and other stakeholders with the additional assurance they need when dealing with these special types of situations. Our fairness opinions are thorough, articulate, and heavily researched, and all the elements of the transaction (including valuation, structure, and process) are fully analyzed and examined.
We have rendered independent third-party fairness opinions to clients of all sizes and types in a broad range of situations, including:
- Buy-side and sell-side M & A transactions
- Related party debt and equity transactions
- Take Private or “Go Dark” Transactions
- Disposition of an asset, or a portfolio of assets
- Down-round financings
- LBO- and ESOP-related transactions
Purchase Price Allocations
Asset purchases and business combinations trigger a number of financial reporting requirements that must be on an accurate and timely basis. Accounting Standard Codification 805 (formerly known as SFAS 141R) establishes accounting guidance for allocating the premium paid above book value for both tangible and identifiable intangible assets acquired in a given transaction. In delivering these purchase price allocations or PPAs, Madison Street Capital’s talented professionals call upon decades on hands-on experience in valuing tangible assets, as well as separately recognizable intangible assets and intellectual property.
We provided significant input as SFAS was drawn up, along with the subsequent implementation guidance provided by the FASB. Our unique insights and thorough understanding of valuation requirements in these situations help our clients overcome new challenges in the initial and post-closing recording of transactions linked to acquisitions, and the proper determination of fair value of assets and liabilities.
Because we have worked in hundreds of industries and industry verticals, we can seamlessly combine industry knowledge with valuation expertise to effectively address allocation issues throughout the transaction process. Our services in the PPA area include amortization estimates, fair value estimates and support, and pro forma allocations, among others. In tapping our expertise and capabilities, our clients can confidently establish an overall purchase price based on our rigorous determination of the fair market value and useful lives of fixed assets, intangible assets related to customers, contracts, technology, marketing, and other factors, as well as intellectual property.
- Identifying reporting units and the implications of the overall reporting structure
- Assigning acquired assets and liabilities (including goodwill) to the proper reporting unit
- Determining the fair value of each reporting unit
- Computing the implied fair value of goodwill
Solvency & Capital Adequacy
Solvency is broadly defined as the ability to meet debt obligations as they become due. A solvency analysis is a prudent and logical method of securing the correct level of assurance in leveraged buyout or other transaction. Three tests must be satisfied for an enterprise to be considered solvent:
- The balance sheet test, which determines if the fair value of a company’s assets exceed its liabilities, with the assets valued on a going-concern basis
- The cash flow test, which analyzes the company’s ability to service its debt load on a timely basis through expected earnings, additional borrowing capacity, or accumulated cash on hand
- The capital adequacy test, which show if a company has enough capital to support internal operations in the face of a financial performance that falls short of expectations
Madison Street Capital’s experienced professionals have the expertise in valuations, the in-depth knowledge of bankruptcy laws, and deep and broad-ranging M&A experience to produce accurate and independent solvency opinions for boards of directors, lending institutions, equity sponsors, advisors, and other clients. We analyze historical and projected financial statements to identify all contingent liabilities such as letters of credit, convertible securities, tax liabilities, and pending litigation while thoroughly reviewing documents such as SEC filings, loan covenants, and operating plans. Our solvency opinions can establish a lender’s trust in making a loan, proffer a form of due diligence and evidence of good faith, and mitigate the risk of bankruptcy liability for all parties involved in a given transaction.