50 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s Fairness opinions and solvency opinions are similar to a typical business valuation in terms of approach, but fairness and solvency analyses require additional detail, rigor and research given the risk profile of the assignment. For that reason, my team of professionals who lead these analyses have decades of valuation and transaction consulting experience. How do you differentiate your services from your competitors? We provide fully independent fairness opinions and solvency opinions. I stress “independent” because our fees are not contingent upon whether the transaction closes, nor contingent on the size of the transaction. We work on a fixed fee basis for all fairness opinion and solvency opinion work. This compares to some firms that offer contingent based, investment banking services or advisory services and a fairness opinion for the same transaction. However, we believe that doing so is an inherent conflict of interest because of the simple reason that if the transaction does not close, they do not get paid. Plain and simple – they are fully motivated to opine that a deal is deemed fair or that a company will remain solvent post transaction. Wealsobelieve that our transaction opinion review process is second to none. The project team is typically led by a very experienced managing director. Their work is then reviewed by senior members of the firm, including myself. Finally, the analyses and opinions are presented to our internal committee – which consists of four executive board members of our firm. The committee includes our Chairman, a seasoned corporate attorney; our Vice Chairman, retired ‘Big 4’ audit partner; our President and CEO; and the leader of our national Financial Valuation and Consulting practice. Every one of our fairness opinions and solvency opinions must pass their scrutiny before we take it to our clients. What are the key complexities that can arise during the process? One of the biggest issues that we run into – especially with solvency opinions – is when the company is viewed differently from a dayto-day operational perspective as compared to its legal structure. For instance, advising counsel will typically want a solvency opinion at each step of the transaction, i.e., from where the debt flows in, to where any cash flows out. If a company has a complicated legal structure, the debt may flow in very low on the ownership chain, and not in an entity that is typically viewed on its own, standalone perspective. Other complexities include fairness opinion assignments that require the valuation of the equity of entities on both sides of the transaction or rollup transactions (e.g., up-REIT transactions) that require the valuation of equity in multiple funds or entities being consolidated. Some transactions require that we determine values for underlying assets such as investments in real estate. For these assignments, we have a robust in-house real estate valuation practice that plays a key role. How do you resolve them? We understand that many of our clients do not have experience with valuation concepts, fairness opinions or solvency opinions – so we educate them along the way and work through the challenges. Sometimes this means brainstorming with their counsel and other advisers on new ways to solve a problem. Each transaction is unique and that is what makes our work challenging and exciting! We enjoy being a resource to our clients and earning the opportunity to be their trusted advisers. “Fairness opinions and solvency opinions are similar to a typical business valuation in terms of approach, but fairness and solvency analyses require additional detail, rigor and research given the risk profile of the assignment. “
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