FAIRNESS OPINIONS
We were retained by a large medical malpractice insurance company to render a fairness opinion regarding the sale of substantially all of the assets of the company to a competing malpractice insurer. The selling company operated as a mutual insurance company—that is, it was owned by the insured physicians. Further, the terms of the transaction called for an acquisition price payout over time. The payout formula was based on a mutually agreed upon surplus value at the closing date. This asset acquisition transaction required the approval of the state department of insurance.
OTHER OPINIONS
We provided valuation consulting services to a privately held, upscale, mid-priced restaurant company with over 40 locations across the United States. We prepared a valuation analysis that was used for (1) the recapitalization of the subject company equity and (2) the simultaneous redemption of a principal shareholder. Following the recapitalization, we estimated the fair market value of a noncontrolling equity ownership interest for purposes of a related-party sale transaction. Our valuation involved an analysis of (1) the company's multiple restaurant concepts, (2) the expected lifecycle of each restaurant concept, and (3) the company's competitive position in each market.
We provided valuation consulting and financial advisory services to a privately held, mid-size communications holding company. Our valuation opinion was used for management planning purposes in conjunction with the restructuring of the company's equity ownership. Our analysis included the valuation of the holding company's (1) incumbent local exchange carrier (ILEC) wireline company, (2) emerging wireless company (including a cellular division and a PSC division), and (3) broadcasting company. Our analysis also involved the valuation of specific intangible assets held by the wireless company, including its FCC licenses.
ESOP FINANCIAL ADVISORY ISSUES
Valuations related to sale of stock to an ESOP
Closely held employer corporation stock that is acquired by an employee stock ownership plan (ESOP) must be appraised to determine that the ESOP trust does is not pay more than fair market value for the employer stock. This requirement for employer stock appraisals is provided by ERISA. Our analysts have completed literally hundreds of these ESOP formation employer stock valuations in a wide variety of industries and transaction structures.
Valuations related to ESOP plan administration
At least annually, the value of the employer corporation shares held in the ESOP must be determined. Typically, such sponsor company stock valuations are completed annually. However, many of our ESOP clients retain us to appraise the employer stock on a semi-annual or quarterly basis. Our analysts have completed over a thousand of these periodic stock valuations for employer corporations in many different industries. In addition, we are often asked to perform the periodic ESOP stock valuations previously performed by other valuation firms.
Fairness opinions related to sale of an ESOP company
Successful ESOP sponsor companies sometimes receive unsolicited offers from independent parties to acquire the employer corporation. The ESOP trustee will typically obtain an independent fairness opinion in such circumstances. The independent financial adviser's fairness opinion will state that the proposed acquisition transaction is fair to the ESOP from a financial point of view. Our financial advisers have been called upon to provide literally hundreds of such opinions. In completing these employer stock purchase transaction fairness opinion engagements, our financial advisers often assist the ESOP trustee in negotiating the most favorable price and structure terms for the ESOP.
Financial advisory services related to executive compensation plans in ESOP companies
Many ESOP plan sponsor companies have installed key employee equity-based compensation plans at the time of the ESOP formation. Our analysts have worked with ESOP sponsor companies and with ESOP trustees to design and implement such plans. The objective of such equity-based executive compensation plans is to align the goals of management with the goals of the company and of the ESOP. In these cases, we pay particular attention to the amount of equity ownership dilution to the ESOP that may result from the specific provisions.
ESOP feasibility studies
Prior to the formation of an ESOP, most employer corporations have ESOP feasibility studies prepared. The objectives of such an ESOP feasibility study are to determine: (1) the most probable stock price that the ESOP can pay, (2) the ESOP's ability to amortize the resulting stock acquisition debt, and (3) the amount of the employer corporation payroll base related to annual ESOP contributions. Our financial advisers have worked with stock acquisition clients in a wide variety of industries in order to study the feasibility of an ESOP formation.
illamette Management Associates analysts routinely serve as independent financial advisors to assist clients in:
SAMPLE ENGAGEMENTS