Going public (IPO). SEC required independent valuation of minority shares and options granted to management.
Result:
Initially, SEC rejected management’s opinion of value. We developed very supportable rational that Cheap Stock carried unusually high risk. SEC accepted our opinion.
Preferred Stock
Client:
Large manufacturer merging into public company.
Issues:
Part of transaction consideration was newly issued Preferred Stock. Value of preferred greatly affected taxable gain to owners of manufacturer.
Result:
We developed intricate matrix showing value of Preferred Stock with a variety of terms and features. Parties agreed to a set of conditions attached to preferred, which balanced tax effect with purchase price.
Fairness Opinion
Client:
Mid-size public company.
Issues:
Public company (Internet) linked to private firm for advertising and sales. Also, major shareholder of private firm was controlling party in public entity. For rollup of private into public, needed relative values of each. Fairness opinion required to buyout some minority holders in public company.
Result:
Complex and iterative process to value private firm, since its sole client was public Internet company. SEC carefully scrutinized our supporting data and analysis. Approval was granted after we responded to significant inquires from SEC.
Allocation of Purchase Price
Client:
Manufacturer of consumer products.
Issues:
Acquisition of technology in related products. Significant intellectual property involved custom software and proprietary, patented processes.
Result:
We were engaged prior to the acquisition, primarily to estimate the intangible asset value and confirm the transaction price. Our assignment after the deal closed included all assets – real estate, equipment, inventory and intangibles. In addition, we assigned value to the In Process R&D. Residual goodwill was nominal.
Buy-Sell Agreement
Client:
Distributor of electronic components.
Issues:
Three shareholders wanted succession protection.
Result:
Business valued as basis for life insurance coverage. Key ratios developed so company could update initial valuation.
Goodwill Impairment
Client:
Manufacturer of medical identification products.
Issues:
Prior acquisition of related technology was questioned by auditors for possible goodwill impairment.
Result:
Followed procedures of FAS 142. Analyzed value of reporting unit acquired a few years ago. Value of unit was less than the carrying value. Completed step two of required procedures and revalued each intangible asset. Result was an impairment of 75% of the goodwill on balance sheet.
C to S Corporate Conversion
Client:
Engineering consultant to construction industry.
Issues:
Determine business value at end of fiscal year to determine built-in gain.
Result:
Conversion of organization to S corporation, with minimum taxable gain in event of sale of company in ensuing 10 years.
Discount Analysis
Client:
Real estate holding company.
Issues:
Complicated and interlocking partnerships owned portions of various income producing properties. Analysis required to discount LP and GP interests at several levels.
Result:
Provided exhaustive roadmap for each discount at three levels of ownership. Arguments and analysis supported third level; however, client decided to report minority and marketability discounts at only two levels. We sustained all discounts upon audit by IRS.
Transfer Pricing
Client:
Large U.S. company with engineering technology.
Issues:
Transfer technology to Bermuda and objectively minimize U.S. tax burden.
Result:
Performed rigorous IRC Section 482 analysis. First step was to value technology. Next part of valuation was to determine market value of licensing payment to parent company. This latter analysis involved economic matrix on comparable profits (industry factors) and various profit splits related to parent’s return on capital.
Non-Profit
Client:
Medical Foundation.
Issues:
Balance family desire to fund medical research with Federal regulations.
Result:
Foundation required to payout most of earned income. Payout based on annual market value of assts, some of which were income producing real estate and businesses. Client able to balance payout mandate with underlying value of assets.
Options
Client:
Public company with numerous retail locations.
Issues:
Stock market had pushed executive stock options “underwater” or well below strike price.
Result:
Assessed numerous factors for issue of new options, including intrinsic value of the business. Even though it was public, stock was thinly traded. To estimate current value of Options, we focused on stock volatility, dilution, financial stability of company and expiration time to exercise.
Sale Price
Client:
A regional paving and roofing asphalt manufacturer.
Issues:
Out-of-state ownership was forced to sell the entire operation on short notice. This included a refinery and separate tank farm, including underground pipelines, and three distribution facilities in another state.
Result:
TMG valuation experts and management consultants worked quickly and efficiently with corporate management to determine market value. We coordinated closely with interested buyers to achieve the asking price of $56 million in less than six months.
