Understanding, analyzing, identifying, and defining value is the foundation of Madison Street Capital and represents our core expertise. Our experienced professionals draw on the most sophisticated analytical tools and financial modeling techniques available anywhere, then augment this resource with first-person transaction experience to determine a precise and objective enterprise value. We assist clients seeking to determine corporate worth for all types of environments and situations including:

• Initial Public Offerings (IPOs)
• Mergers & Acquisitions
• Shareholder redemptions
• Tax liability determinations
• Succession plans and reorganizations of family-owned enterprises
• Collateral value assessments
• International transactions
• Employee Stock Ownership Plans (ESOPs)
• Convertible and debt securities
• Stock Options

Independent 3rd Party Fairness Opinions

Certain business transactions require an extra element of diligence and care based on complexity, independence, and many other factors. When a transaction will result in a change in control, and/or a significant change to a company’s capital structure, those entrusted with fiduciary responsibility are wise to seek additional assurance as a protective measure to ensure the terms of the deal, from a financial point of view, are fair.

Madison Street Capital provides fairness opinions both on a standalone basis and in support of a broader financial advisory engagement. We deliver robust analyses that provide fiduciaries such as boards of directors, special committees, management, and other stakeholders with the additional assurance they need when dealing with these special types of situations. Our fairness opinions are thorough, articulate, and heavily researched, and all the elements of the transaction (including valuation, structure, and process) are fully analyzed and examined.

We have rendered independent third-party fairness opinions to clients of all sizes and types in a broad range of situations, including:

• Buy-side and sell-side M&A transactions
• Related party debt and equity transactions
• Take Private or “Go Dark” Transactions
• Disposition of an asset or a portfolio of assets
• Recapitalizations
• Down-round financings
• LBO- and ESOP-related transactions

Purchase Price Allocations

Asset purchases and business combinations trigger a number of financial reporting requirements that must be on an accurate and timely basis. Accounting Standard Codification 805 (formerly known as SFAS 141R) establishes accounting guidance for allocating the premium paid above book value for both tangible and identifiable intangible assets acquired in a given transaction. In delivering these purchase price allocations or PPAs, Madison Street Capital’s talented professionals call upon decades of hands-on experience in valuing tangible assets, as well as separately recognizable intangible assets and intellectual property.

We provided significant input as SFAS was drawn up, along with the subsequent implementation guidance provided by the FASB. Our unique insights and thorough understanding of valuation requirements in these situations help our clients overcome new challenges in the initial and post-closing recording of transactions linked to acquisitions, and the proper determination of fair value of assets and liabilities.

Because we have worked in hundreds of industries and industry verticals, we can seamlessly combine industry knowledge with valuation expertise to effectively address allocation issues throughout the transaction process. Our services in the PPA area include amortization estimates, fair value estimates and support, and pro forma allocations, among others. In tapping our expertise and capabilities, our clients can confidently establish an overall purchase price based on our rigorous determination of the fair market value and useful lives of fixed assets, intangible assets related to customers, contracts, technology, marketing, and other factors, as well as intellectual property.

Goodwill & Intangible Asset Impairment

As a pre-eminent provider of valuation services related to financial reporting, our professionals have a thorough understanding of the evolving environment and changing regulations in the areas of goodwill impairment testing and business combination accounting practices. Our analysis in these key areas results from a comprehensive base of knowledge of the applicable accounting rules, combined with the valuation expertise that lies at the core of our operations and our experience in assisting clients in manufacturing, the service sector, technology, energy, and hundreds of other industries. As a result, we can address the unique issues faced by our clients in their specific niche of the overall economy, while executing those elements shared by all impairment tests. Our services in this area include:

• Identifying reporting units and the implications of the overall reporting structure
• Assigning acquired assets and liabilities (including goodwill) to the proper reporting unit
• Determining the fair value of each reporting unit
• Computing the implied fair value of goodwill

Share-Based Compensation

Madison Street Capital has extensive experience in multiple forms of share-based compensation as they relate to specific valuation methods – including stock options, restricted stock, phantom stock, stock warrants, and other complex structures – and in measuring the cost of these incentives in financial statements. Based on the structure in place for each client, we rely on highly sophisticated quantitative tools in modeling potential share values, ranging from binominal lattices and modified Black-Scholes option pricing models to Monte Carlo price path simulations and other forms of probability-based financial modeling.

We have broad experience in providing formal opinions of value calculated through our proprietary methods and prepared according to FAS 123(R), as well as reconciling FAS 123(R) to IRC 409(A). Our services also include providing reviews and commentary on client-prepared models, data, and conclusions, as well as preparing transparent and verifiable model inputs for multiple scenarios such as early exercise, termination, retirement probabilities, and annual volatility.

Structured Finance Products

Our firm has achieved national recognition for our specialized expertise in valuing sophisticated structural securities and credit instruments, including structured investment vehicles, collateralized debt obligations, collateralized loan obligations, auction rate securities, and other complex instruments. Our professionals thoroughly understand the complex valuation issues tied to these products, and call upon proprietary quantitative financial modeling techniques and the extensive market data available to us to identify a range of fair values for structured products. As a FINRA member and licensed broker-dealer, we can also obtain bids from the secondary market.

Working closely with auditors and investors, we provide timely, reliable, and precise valuations for the entire range of structured finance products. We have helped clients value their holdings, project future performance, and test trading strategies. Because our models and databases are built and maintained in-house, we can tailor our approach to each client’s unique needs in providing consistent and transparent results. Our experience and skill in this area takes on added importance as demand grows for greater transparency in pricing and valuation in an era of post-crisis financial reform.

Solvency & Capital Adequacy

Solvency is broadly defined as the ability to meet debt obligations as they become due. A solvency analysis is a prudent and logical method of securing the correct level of assurance in leveraged buyout or other transaction. Three tests must be satisfied for an enterprise to be considered solvent:

• The balance sheet test, which determines if the fair value of a company’s assets exceed its liabilities, with the assets valued on a going-concern basis.
• The cash flow test, which analyzes the company’s ability to service its debt load on a timely basis through expected earnings, additional borrowing capacity, or accumulated cash on hand.
• The capital adequacy test, which shows if a company has enough capital to support internal operations in the face of a financial performance that falls short of expectations.

Madison Street Capital’s experienced professionals have the expertise in valuations, the in-depth knowledge of bankruptcy laws, and deep and broad-ranging M&A experience to produce accurate and independent solvency opinions for boards of directors, lending institutions, equity sponsors, advisors, and other clients. We analyze historical and projected financial statements to identify all contingent liabilities such as letters of credit, convertible securities, tax liabilities, and pending litigation while thoroughly reviewing documents such as SEC filings, loan covenants, and operating plans. Our solvency opinions can establish a lender’s trust in making a loan, proffer a form of due diligence and evidence of good faith, and mitigate the risk of bankruptcy liability for all parties involved in a given transaction.