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Solvency and Fairness Opinions


Answer with confidence


The fall out from Sarbanes Oxley has left many feeling vulnerable—professionally and personally.  In the event of a significant transaction, investors, analysts and regulators will scrutinize every move made.  Even the perception of a conflict of interest could cause major headaches.

A volatile market can wreak havoc on share prices.  Weakened share prices may attract financial or strategic investors or force companies to initiate measures to enhance shareholder value.  Furthermore, companies are unwilling to wait for strong credit markets before spinning off underperforming or non-essential units; in some instances, breaking up entire companies.  Finally, there will always be investors who pursue acquisitions, regardless of the availability or cost of debt.

Given the stakes, finding an experienced firm and to a greater extent—an independent one—is essential for your transaction needs.  American Appraisal possesses both qualities. Here you will be interacting with some of the most respected experts in North America.  We are focused squarely on providing opinion services and related services.  There are no agendas here; other than meeting your need for accuracy and impartiality.

We invite you to discover the American Appraisal difference.

What we do



Solvency Opinions
When a court evaluates a solvency opinion, it considers the integrity and independence of the firm issuing it, the analytics underlying the opinion, the rigor of the due diligence and the thoroughness of its documentation.

American Appraisal has been at the forefront of developing and applying the accepted approaches used to determine solvency in bankruptcy and fraudulent conveyance scenarios.  We perform extensive tests to meet due diligence requirements and to address the background of the specific transaction.

Due Diligence and Analysis
We conduct comprehensive analyses of the transaction, the company, historical and projected financial statements, as well as the economy and outlook for the particular industry.  In addition, some of the other activities we undertake include:

  • Interviewing management and their advisors
  • Inspecting company facilities, if appropriate
  • Evaluating comparable public companies and transactions
  • Examining stated and contingent liabilities

These analyses provide the basis for the tests of solvency.

The Tests
Bankruptcy law, as it has evolved, looks at four key tests of solvency:

  • Balance sheet test:  Does the fair value and present fair saleable value of the aggregate assets exceed aggregate liabilities (stated and contingent)?
  • Cash flow test: Is the projected cash flow sufficient to repay debts and other obligations as they come due?
  • Capital adequacy test: Will the entity have “adequate capital” with which to conduct its business?
  • Shareholder distribution test: Does the present fair saleable value of the assets over the probable value of the liabilities exceed the value of the distribution plus the stated capital?

Fairness Opinions
A fairness opinion states that the proposed transaction is fair from a financial point of view.  However, not all fairness opinions are created equally.  The selection process of a provider, the manner in which an opinion is assembled, and how it is then reviewed by the board can make a real difference in how well the transaction and the board’s decisions stand up to legal challenge.  Board members can no longer afford to use a checklist approach.  They must exercise due care to fully examine the fairness opinion provider’s potential conflicts as well as ask insightful questions throughout the entire process.

American Appraisal leaves no stone unturned.  Our documented processes address everything from the acceptance of projects to the analytical methodologies to the final opinion issued by our independent committee of senior level professionals.  Specific considerations include:

  • Core analyses
    • Company valuation and specific valuation of equity classes or debt securities
    • Based on indicated range of fair value and analysis of the transaction, determine if transaction price is fair from a financial point of view
  • Alternatives considered by the board
  • Process undertaken by the board (e.g. full or limited auction)
  • Structure of the transaction including breakup fees and fiduciary outs
  • Likelihood of transaction closing (e.g. regulatory and financing considerations)
  • Thorough analysis/assessment of the offer and the opportunity to improve terms  
  • What is the type of consideration (cash, cash and stock, cash and notes)?

 

Why us?


If you’re contemplating the engagement of an opinion services firm, ask yourself, which one brings the most experience to the table?  Which firm can provide the independence that is required?  Which firm assigns senior level professionals to every engagement?  Which one convenes a panel of senior people to probe the soundness of the conclusion?  When you examine the realities, we think you will find there is only one answer... American Appraisal.
 

We KNOW Solvency and Fairness Opinions.
Our senior level professionals were there at the formation of this valuation practice area in the late seventies.  Today, our best practices and methodologies are testament to our extensive and diverse experience.

  • Our reports have withstood scrutiny of the world’s most discerning regulatory, judicial and taxing authorities.  We are the preferred provider to top law firms for issuing credible, authoritative and well-documented fairness and solvency opinions; and possess experience in opinions involving SEC-related disclosures.
  • We have been engaged to provide opinions in some of the largest and most challenging transactions of the past decade.

We are independent.
American Appraisal focuses exclusively on valuation and related solutions, including opinion services.  That independence guarantees our greater objectivity.

  • This is our only business; thereby ensuring the delivery of our opinion is not subject to the consummation of the transaction.
  • We are independent of any other aspect of the transaction, including rating agency, investment banking or other conflicts.

We are glocal.
We believe there is a world of difference between being global and acting global.  We call it ‘glocal’; the ability to think globally and act locally.

  • American Appraisal, the world’s only truly glocal valuation firm™, is comprised of 900 employees, operating from cities throughout Asia-Pacific, Europe, and North and South America.

We are experts.
Our senior level professionals, who have been with us an average of more than ten years, have the experience necessary to value any business and type of security.

  • Focused on and committed to valuation since 1896
  • Unrivalled interaction with key valuation standard setting agencies ASA, AICPA/ABV, FASB, IASB, IVSC, AITF and PCAOB
  • Credentials include PE, CPA, CFA, ASA, ABV, MAI and MBA

We are focused on Client needs.
American Appraisal is employee owned.  We aren’t merely involved in valuation; we are unequivocally committed to meeting Client needs. On every engagement, direct Client access to the firm’s senior management is always the norm, never an exception.


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