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.