PUBLICATIONS AND RESEARCH

Financial Advisory Services Insights

Financial Adviser Procedures to Help Clients Avoid Overpaying in Mergers and Acquisitions
Robert P. Schweihs
At the end of 2005, many industries are poised for a cycle of acquisitions and consolidations. Historically, the managements and boards of many industrial and commercial companies have been accused of overpaying for target acquisitions. This article describes practical procedures that financial advisers can use to help clients avoid overpaying for acquisition targets.

Valuation Adjustments in a Financial Adviser Transactional Analysis Robert F. Reilly
Systematic and nonsystematic valuation adjustments can be either decremental (called valuation discounts) or incremental (called valuation premiums). Systematic adjustments are discounts or premiums that affect business and security valuations across the board-such as level of value adjustments. Nonsystematic adjustments are discounts or premiums that relate to a specific company or security-such as key customer dependence or buy/sell agreement transferability restrictions. This discussion explains the common procedures for identifying the factors or conditions that indicate the need for a nonsystematic valuation adjustment. This discussion explains the common procedures for quantifying nonsystematic valuation adjustments. This article includes several simplified illustrative examples. Finally, this article considers the appropriate sequencing of nonsystematic valuation adjustments.

The Role of the Independent Financial Adviser in M&A Transaction Fairness Opinions
Robert P. Schweihs and Robert F. Reilly
Corporation boards of directors (not-for-profit institution trustees, securities lawyers, and other parties) typically request-and rely on-fairness opinions when evaluating merger and acquisition (M&A) transactions. Typically, however, these fairness opinions are issued by the same investment banker/financial intermediary who structured and priced the pending M&A transaction. This discussion contrasts the role of the deal financial intermediary with the role of the independent financial adviser with respect to the probity and objectivity of M&A transaction fairness opinions.

Directors & Boards Interview with Bob Schweihs
In its May 2005 issue, the journal Directors & Boards, interviewed Willamette Management Associates managing director Robert P. Schweihs. Schweihs discussed the role of the independent financial adviser (particularly as it relates to reasonableness of executive compensation issues and to corporate governance issues) with Directors & Boards. The following is a reprint of the May 2005 Directors & Boards interview.

The Role of the Financial Adviser in Valuing Pharmaceutical Industry Intellectual Property
Robert P. Schweihs and Michel M. St. Martin
Pharmaceutical industry products that are in the early stages of development present special valuation challenges. These early-stage ventures often have no product revenue to date and little or no operating expense history. These ventures usually involve an incomplete management team with an idea, plan, and some initial product development. Using a hypothetical new prescription drug, this article explains that the reason the rates of return that are required for such early-stage ventures appear high is because those required rates of return reflect the probability of-and cost of-failure.

Valuation-Related Financial Advisory Services for Bankruptcy Purposes
Robert F. Reilly and Ashley L. Reilly
Although the number of business bankruptcy filings has decreased somewhat since the mid-1990s, there continues to be a significant number of industrial and commercial companies for all sizes filing for bankruptcy protection. This article describes ten common reasons why financial advisers may have to perform valuation services related to an industrial or commercial company debtor in bankruptcy. And, this article describes seven common factors that a financial adviser should consider when performing a bankruptcy-related valuation.

ESOP Financial Advisory Services Insights

The Role of the Independent Financial Adviser in the ESOP Feasibility, Formation, and Transaction Fairness Process
Malcolm R. Hartman
This discussion focuses on the role of the independent financial adviser in (1) identifying successful employer corporation candidates for an ESOP formation, (2) performing an ESOP formation feasibility study, and (3) preparing an ESOP stock purchase/sale transaction fairness opinion. This discussion is intended to provide guidance (1) to closely held corporation owners considering an ESOP formation and stock sale transaction and (2) to legal, accounting, and other ESOP professional advisers considering an ESOP stock purchase/sale transaction.

"ESOPs Emerge as an Attractive Exit Strategy"
a Reprint of an Article from the July 25, 2005 Issue of FactSet Flashwire Weekly
FactSet Flashwire Weekly recently interviewed Mike Hartman, a principal in our firm's ESOP financial advisory services practice. In this interview, which is reprinted below, Hartman describes the economic benefits of an ESOP formation as an exit strategy for the owners of a family-owned or other closely held business. In particular, a leveraged ESOP formation can provide significant corporate income tax advantages to the employer corporation/ESOP sponsor. And, a leveraged ESOP buyout of the employer corporation stock can provide significant capital gains tax deferral benefits to the selling shareholders.

Willamette Management Associates Insights

Book Review of The Handbook of Business Valuation and Intellectual Property Analysis

Book Review of Willamette Management Associates Guide to ESOP Valuation
This book review appeared in the February 2005 issue of The CPA Journal. It is reprinted with permission of the publisher. Martin J. Lieberman, CPA/ABV, ASA, is a partner and director of business valuation at Rosen Seymour Shapss Martin & Co., LLP, New York, N.Y. He is a member of the NYSSCPA Business Valuation Committee.