Solvency Opinions

Lenders, financial advisors, attorneys, boards of directors and shareholders contemplating acquisitions, mergers or recapitalizations must rely on an independent, experienced firm to provide an objective solvency opinion. American Appraisal, with both independence and experience, is at the forefront of developing and applying the accepted approaches used to determine solvency. All of our solvency opinions involve comprehensive due diligence, with analysis of:

• The transaction
• The company
• The economy
• Industry-specific forecasts

Transactions involving solvency opinions include:

• Leveraged buy-outs (LBOs)
• Management buy-outs (MBOs)
• Share buy-back
• Spin-offs
• Issuance of a dividend
• Restructuring
• Going private

Key Tests of Solvency
A solvency analysis requires the following key tests, developed from judicial opinions and statutes:

• Balance sheet test: Do the fair value and present fair salable value of the company’s aggregate assets exceed its 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?

In addition, certain state corporate statutes require the inclusion of the following test in the solvency analysis:

• Shareholder distribution test: Does the present fair salable value of the assets over the probable value of the liabilities exceed the value of the distribution plus the stated capital?

Why American Appraisal?
Over the last 25 years, we have provided independent, objective solvency opinions involving some of North America’s largest LBOs. American Appraisal has established a reputation for credible, authoritative, and well-documented solvency opinions. Our experienced team of financial consultants performs extensive tests to meet due diligence requirements and address key concerns surrounding various types of transactions.