After the laborious process of finding the right deal, the signing of an LOI leads to a new set of obstacles for search entrepreneurs. Often, these obstacles can shift a search entrepreneur’s focus away from getting the deal closed. Typical examples of these ‘deal breakers’ include:
- Inaccurate financial statements
- Failure to track KPIs
- Recent changes in industry and the market
- Failure to attract financing
- Incomplete financial modeling
Intrinsic, through our Search Fund Advisory Services team, assists search entrepreneurs with essential tasks so they can make more informed and efficient decisions in the deal making process. Intrinsic provides business valuation, machinery & equipment valuation, quality of earnings analysis, investment and operations modeling, and underwriting model development services to improve the probability of a successful acquisition.
Due Diligence & Quality of Earnings
Our Due Diligence and Quality of Earnings practices provide timely and critical intelligence in evaluating the upside and financial risks to a proposed transaction. This process evaluates quality of earnings and value drivers while also identifying high risk areas, hidden liabilities, and potential ‘deal breakers’.
We perform rigorous analysis of financial statements, audit work papers, and other financial and transaction data to gain an in-depth understanding of a target company’s business in relation to your needs. Our due diligence process also includes management interviews and, when necessary and desirable, site visits to evaluate true financial conditions and key performance indicators.
Our quality of earnings analysis includes matters such as:
- Revenue sources and concentrations
- Working capital components, trends, and seasonality
- Adjustments to EBITDA
- Accrued liability recognition
- Asset quality and reserve adequacy
- Debt exposure
Machinery & Equipment and Business Valuation
Our Machinery & Equipment and Business Valuation practices provide expert and reliable valuations for various purposes. Intrinsic offers expertise for industries such as healthcare, oil & gas, mining, restaurants, manufacturing, retail, distribution, and more. Whether the purpose is for underwriting, insurance, or a transaction process, our experts provide unique insights and credible reports i n an efficient manner. Our services include:
|Machinery & Equipment||Business Valuation|
Operations & Modeling Services Overview
The Operations & Business Modeling segment of Intrinsic’s Search Fund Advisory Services practice enables entrepreneurs to partner on mission critical decisions with experienced professionals. Intrinsic helps to mitigate potential ‘deal breakers’ prior to closing, arms search entrepreneurs with the necessary tools to effectively negotiate through the sale process, provide robust models to ID risk with a focus on priority, and strengthen your team’s capabilities through avoiding costly and dilutive additions.
Intrinsic’s services include:
Operating Model Development
- KPI Identification and Tracking
- Variance Analysis
- Integration of Quality of Earnings diligence
- Stress Testing
- Solvency Analysis
Investment and Underwriting Model Development
- LBO Analysis
- Covenant Testing
- Financing Scenario testing
- Lender presentation
- Exit planning
ESOPs are an effective vehicle for the transition of closely held business ownership to a company’s employees. Establishing an ESOP can strengthen your company through financial benefits and the creation of a productive ownership culture; however, all of the good effects of an ESOP can only be realized when the transaction is done right from the start. At Intrinsic, our priority is understanding your goals and working with you to ensure those goals have been fulfilled the right way.
ESOP Advisory and Valuation services include:
- Feasibility studies: Knowing that feasibility studies are an important first step in establishing an ESOP, Intrinsic provides essential information to all parties in order to avoid costly mistakes which could harm the long-term success of the ESOP.
- Transaction valuations: Our professionals leverage in-depth knowledge of ESOP transactions to provide guidance on ESOP planning, such as the design, structuring, and financing of the transaction.
- Fairness opinions: With experience in transaction valuations, we offer professional judgment of the proposed ESOP through an independent and comprehensive analysis.
- Annual ESOP valuations: We deliver annual valuations of closely held company securities within ESOPs in order to meet the objectives relating to ESOP administration.
The introduction of fair value accounting, as defined by ASC 820 (formerly FAS 157) has rapidly elevated both the role and importance of valuation in accounting. Private and public companies alike now require third party valuation specialists to assist in engagements involving equity compensation and purchase accounting exercises prompted by acquisitions.
The area is rapidly evolving with best practices changing frequently and sometimes unexpectedly. Intrinsic professionals have played a leadership role among practitioners, authoring groundbreaking articles, participating in industry leading organizations such as the Appraisal Issues Task Force, and regularly interfacing with Big 4 accounting firms as valuation experts in SAS 73 reviews.
Financial opinions support the business judgment of boards of directors by providing credible input from independent third parties with demonstrated expertise in valuing companies and evaluating financial interests in transactions. These exercises assist boards in fulfilling their fiduciary duties to shareholders and debtholders. The two most common forms of financial opinions include fairness and solvency opinions.
Fairness opinions provide important data points for boards to consider when determining the fairness, from a financial point of view, of a merger, acquisition or other related corporate transaction or restructuring. These opinions satisfy a duty of care and a comprehensive, multi-faceted fulfillment of fiduciary responsibilities at the board-level.
Solvency opinions provide underlying support, when determining if a leveraged transaction would render a company insolvent. Specifically, courts may retrospectively find a fraudulent conveyance, arising from a transaction in the zone of insolvency, thus constituting an illegal transfer of property to another party in order to defer, hinder or defraud creditors; or to put such property out of the reach of a creditor.
The exercise of testing for solvency includes three primary analyses: i) the subject company’s assets exceed its liabilities on a pro forma basis, (ii) it is reasonable to conclude that a subject company will be able to pay its debts and obligations as they mature or come due; and (iii) the subject company does not have unreasonable or insufficient capital to continue as a going concern.
Intrinsic has performed a number of these opinions for some of the most prominent private equity firms in the country. Our professionals are well versed in the complexities that present when rendering defensible opinions . As astute valuation experts with deep experience in transactional valuation, financial modeling, and the legal nuances of these engagements, sophisticated boards of directors have come to rely on Intrinsic’s financial opinions to help deepen their own diligence, and to enhance business judgment around complex transactions.
Increased scrutiny in valuing illiquid assets has prompted investment managers and financial institutions to rely on independent valuation services to avoid the perception of and potential for conflicts of interest.
Intrinsic offers a partnership where our experienced and expert staff can assist clients in improving their credibility by instituting transparent and effective processes for investor relations departments and valuation committees. Through open dialogue and valuation expertise, we provide predictable valuation analyses to encapsulate the spectrum from the investment manager’s thesis, to industry and economic analysis, through consideration of security structure – all while providing a high level of customer service.
In recent years, emphasis from investors has elevated the need for greater quality and more timely reporting. These trends underscore important considerations for investment managers looking to raise funds and maintain healthy relations with current investors.
Source: JP Morgan 2018 Institutional Investor Survey
We specialize in valuing illiquid securities for both ASC 820 (typically classified as Level 2 or Level 3 under the fair value hierarchy) and IAS 39 reporting frameworks. Our portfolio valuation services include:
- Complex derivative instruments
- Estate planning / tax considerations
- Financial opinions (fairness, solvency, and transaction)
- Fund manager valuation
- Global securities (including emerging markets)
- Illiquid debt and loan securities
- Illiquid equity securities
- Investment modelling
- Joint ventures
- Leveraged loans
- LP and GP interests
- PIPE investments
- Real estate investments
- Trade and bankruptcy claims
- Valuation governance and best practices
Intrinsic conducts in-depth analysis and assessment of matters in dispute. Our litigation support experience ranges from economic damages analyses to serving as experts in business and intangible asset valuations. Litigation advisory services: all phases of litigation, including case strategy, discovery, identification of key facts, weaknesses, and other issues, addressing the causal link between liability and damages, quantifying damages, trial preparation, and providing expert witness testimony.
Our approach includes a thorough evaluation of all available evidence to present a calculation of value based on solid financial theory, technical competence, and independent review of the facts relating to each matter.
Our litigation support practice-area includes economic damage assessments, calculations for the fair division of assets, and resolution of transaction disputes. Our emphasis on custom valuation analysis ensures our clients a direct point-of-contact with a valuation advisor who possesses technical expertise, and the resources to produce defensible valuations. Intrinsic offers guidance in matters such as shareholder disputes, family law, bankruptcy proceedings, intellectual property and intangible asset valuations.
Intrinsic professionals have deep industry knowledge throughout the energy value chain, including upstream, midstream, downstream, and oilfield services. We have performed valuation engagements for tax, financial reporting, transaction advisory, and regulatory compliance purposes, applying specific knowledge of the economic, financial, and geopolitical issues faced by the oil and gas industry.
Energy Chain Areas of Expertise
- Exploration and production
- Oilfield Services
Intrinsic has worked with companies in the energy space with assets from under $100 million to over $500 million in value; our valuations have been reviewed and approved by compensation committees and audit firms. Our professionals understand the challenges, opportunities, drivers, and unique facets of the industry, including the regulatory and market factors which impact value, and SEC standards for reserve estimations.
Intrinsic professionals have extensive experience in valuing both illiquid interests and intangible assets in a variety of tax contexts. With limitless access to information resources and a vast network of fellow practitioners, attorneys, and tax experts, we stay abreast of all the most recent legislation and case law pertaining to valuation for tax purposes.
Intrinsic has significant expertise providing financial advisory services to companies in the Healthcare sector. Intrinsic has performed thousands of valuation engagements for tax, financial reporting, transaction advisory, and regulatory compliance. Specifically, our professionals have extensive experience regarding the economic and financial issues faced by the spectrum of Healthcare entities.
Assisted living and long-term care facilities
- Healthcare distributors
- Health systems
- Home healthcare providers
- Managed healthcare
- Outpatient services (diagnostic imaging, ambulatory, and dialysis centers)
- Physician groups
- Pharmaceuticals, Biotechnology & Life Sciences
- Life sciences tools and services
Intrinsic boasts a solid team of healthcare business valuation experts who are highly experienced in providing fair market value (FMV) opinions for all types of healthcare facilities. Determining the fair market value of any healthcare business requires detailed knowledge of the ever-changing regulatory factors that impact value.