If a transaction is done while the seller is insolvent or the seller becomes insolvent as a result of the transaction, then there can be “too good of a deal” and that deal can be undone – even years after it closes. The law which explains this rule, some of which is captured in Section 548 of the Bankruptcy Code, is the law of fraudulent transfer.
Fraudulent transfer exposure can be devastating because civil liability can be imposed without moral fault on the part of the person being sued for recovery and the look-back period can extend up to six years. No actual fraud or normative wrongdoing is required. Civil liability can result simply from having benefited to the detriment of the other party’s creditors where, at the end of the day, there are insufficient assets to satisfy the claims of such creditors.
Fraudulent Transfer occurs when:
Private and public companies are referred to Marshall & Stevens by outside legal counsel and other trusted advisors to provide independent Fairness Opinions for their important transactions.
If there is a concern that even one shareholder may challenge the controlling shareholder(s), management, board of directors, or board of managers – claiming that a transaction being pursued results in unfair treatment to minority shareholders, then a Fairness Opinion should strongly be considered to protect the decision makers.
SPAC / de-SPAC: Fairness opinions are recommended for Special Purpose Acquisition Companies (SPACs) merger, acquisition and other transactions. SPAC fiduciaries are encouraged to engage an independent advisor to provide a Fairness Opinion that addresses fairness from the financial point of view to either the SPAC (buy-side) or the target (sell-side). SPACs have the same public company financial reporting compliance requirements as every other public company (FASB, SEC, PCAOB).
The recent explosion in dividend recapitalization transactions is responsible for the great increase in the number of Solvency Opinion engagement for our professionals. Other transactions where Solvency Opinions are sought by fiduciaries and by financing sources include:
Equity buyouts
Business combination requiring a new level of debt
To be effective, a Solvency Opinion needs to be able to pass judicial muster. Make sure the firm engaged to provide the Solvency Analysis and Solvency Opinion is not relying on the closing of the subject transaction for any part of its fee. Solvency advice from an independent financial advisor can assure a board and its’ stakeholders that the decisions made by the board are fair and reasonable.
Marshall & Stevens is a Independent Solvency Opinion Firm and has been in the valuation business for 90 years and has substantial experience in rendering Solvency Opinions in a wide variety of matters. Employing a high degree of thoroughness and diligence, our professionals bring insight from backgrounds in valuation, law, investment banking, and accounting. Our teams are responsive, nimble and know how to keep the project moving in order to meet the timeline that the transaction requires.
Our Solvency Opinion team collaborates with our internal multi-disciplinary professionals to provide the value analyses and fresh independent opinions to fiduciaries, financing sources and investors for public and private company transactions.
Marshall & Stevens has staff that serve as receivers and who perform investigative/forensic accounting services. We also assist with bankruptcy and restructuring as may be required.
Marshall & Stevens provides valuation, solvency/insolvency opinions, and other consulting services to assist with bankruptcy, restructuring and recapitalization transactions.
Marshall & Stevens has a large team of valuation professionals, all of which have industries where they have a particular expertise, including: agriculture, automotive, chemical, construction and engineering, consumer products, energy and infrastructure, entertainment and media, food and beverage, healthcare, hospitality and gaming, manufacturing and distribution, real estate, professional services, technology.
Marshall & Stevens values companies and assets around the world. Our staff travels as necessary to conduct site inspections, management interviews and perform other due diligence.
We review financial projections against past performance, comparable company performance, and industry forecasts. We ask for support from our clients, as necessary, to make us comfortable with their projections and to provide an explanation in our valuation report.
Marshall & Stevens provides Fairness and Solvency Opinions, valuation analyses, investigative accounting, and expert witness services to assist public and private clients with their important transactions and litigation matters.
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