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Fairness and Solvency Opinions

Fairness Opinions

A fairness opinion provides an independent, objective analysis of a proposed deal's financial aspects from the point of view of one or more of the parties to the transaction. Any number of factors in deals involving both public and private companies can trigger the need for a fairness opinion. These documents are frequently used to protect the interests of company directors, stockholders, investors and any other involved parties with any kind of fiduciary responsibility. Fairness opinions are often requested in deals involving public offerings, leveraged buyouts or major refinancing/restructuring.

ValueScope has the personnel, expertise and research resources to provide the assurance of fairness to participants that these types of deals require. We are highly experienced in mergers, acquisitions, divestitures and related services. We have worked on many such transactions. A fairness opinion from ValueScope is the product of a comprehensive analysis that includes a thorough review of the terms and structure of the proposed transaction.

Tight deadlines and rapid turn-around are never a problem for us. The combination of experience, in-depth analysis and sterling credentials that we bring to a fairness opinion can help to discourage challenges from third parties. Not surprisingly, a wide range of both public and private corporations and boards of directors call on us to provide them with independent opinions regarding acquisitions, divestitures, management buyouts and similar major transactions.

Fairness opinions include:

  • The issuance of minority non-trading stock for public companies
  • Combination of business entities
  • Debt restructuring
  • Franchise acquisitions
  • Reg D and public offerings
  • Non-compete agreements
  • Acquisitions

What is a Fairness Opinion?

A fairness opinion is frequently used to protect the interests of company directors, stockholders, investors and other parties involved financially in a proposed business transaction. This opinion is based on financial factors and provides an independent objective analysis of a proposed deal from the point of view of one or more of the parties involved. A fairness opinion also provides information about the proposed transaction to key decision makers. They are often requested in deals involving public offerings, leveraged buyouts or company refinancing/restructuring.

To avoid costly litigation, we recommend obtaining a fairness opinion before completing certain business transactions.

 

Solvency Opinions

A secured lender assumes it enjoys a priority position in the event of a bankruptcy filing by one of its debtors, and rightly so. However, a lender might find that priority position canceled by the bankruptcy court unless it can present clear evidence of future solvency. The only effective means for a lender to protect its secured position in the event of a debtor's bankruptcy is with a solvency opinion. The solvency opinions provided by ValueScope represent the kind of detailed analysis of critical financial variables clients require. Our primary focus is to demonstrate a sufficient cash flow to operate the business and service debt, even under adverse conditions. Not coincidentally, that is also the bankruptcy court's and debtor's focus.

As part of our analysis we conduct a detailed review of critical business risks, contingent liabilities, and the market value of assets. Among the resolutions that our completed solvency opinions reach are:

  • That the fair market value of the company's assets would exceed its stated liabilities and identified contingent liabilities
  • That the company would be "able to pay its debts as they became absolute and mature"
  • That the capital remaining in the company would be reasonable for the business in which it is engaged

ValueScope has provided clients with solvency opinions covering a wide variety of circumstances.

Are Solvency Opinions Similar to a Fairness Opinion?

Similar to a fairness opinion, solvency opinions are used to protect parties involved in a business deal. Solvency opinions are an effective means for lenders to protect their priority position in the event of a bankruptcy filing by a debtor. Solvency opinions allow lenders to present clear evidence of future solvency.