In the case of Connelly v. United States, a roofing and siding materials company, Crown C Supply Company, Inc., faces a complex legal and financial challenge following the death of one of its major shareholders. The dispute centers on whether life insurance proceeds should be included in the company’s equity value for buyout purposes, a decision with significant implications for the valuation of shares and the financial future of the company. This case, now headed to the Supreme Court, highlights the critical importance of clear buy/sell agreements and the role of life insurance in shareholder buyouts, offering essential insights for businesses navigating similar transitions.
One of BankWatch’s favorite artists is the Dutch painter Hieronymus Bosch (1450-1516). One triptych, The Garden of Earthly Delights, depicts a utopian scene in the middle panel adjacent to a hellscape in the right panel. It serves as an apt metaphor for the banking industry’s stomach churning volatility in 2023.
Preliminary results for 2023 show that the number of goodwill impairments is increasing for both large and middle-market public companies. Based on data through November, the number of impairments recorded by firms on the S&P 500 and Russell 2000 indices had already eclipsed 2021 and 2022 full-year figures. Interestingly, these trends materialized even as the indices themselves posted favorable total returns for the year of 25% and 14%, respectively. Public and private companies currently in the process of performing their annual/interim impairment tests should be on the alert if their peer group turns out to be the one recording impairment charges.
An RIA’s margin is a simple, easily observable figure that condenses a range of underlying considerations about a firm that are more difficult to measure. As much as a single metric can, margins reflect the health of a firm—indicating whether a firm has the right people in the right roles, whether it’s charging enough for services, whether it has enough (but not too much) overhead, and much more. But when assessing your firm’s margins, it’s important to consider the context of the firm’s ownership and compensation structure and also the tradeoffs associated with margins that are too high or too low.
Another tough call for the merger arb community – acquirer and target sue each other in Delaware Court of Chancery to respectively terminate the merger agreement or force consummation of the merger.
Bank and thrift M&A activity was subdued in 2023, with deal values reaching multi-decade lows. The challenging M&A environment was exemplified by the failed merger between Toronto-Dominion Bank and First Horizon in May, and continuation of the bear market that developed in 2022 for bank stocks and fixed income securities. Despite the overall slump, or perhaps because of it, M&A activity eventually will rebound, potentially explosively if the Fed follows through with rate cuts and the economy avoids a meaningful recession.
In the third and fourth quarters of 2023, securities portfolio restructuring is a strategy that appears to be gaining momentum as more banks are opting to realize losses on underwater securities. In this month’s Bank Watch, we look at some of the recently announced transactions and discuss potential advantages and disadvantages of balance sheet repositioning.
The third quarter of 2023 has certainly been one for the books for the Transportation & Logistics industry. The shipping frenzy brought on by the COVID-19 pandemic has run its course and the industry is returning to more normal levels. At the same time, it is important to note that a decline from never-before-seen highs does not necessarily indicate a freight recession is underway. Many of the year-over-year data points will indicate large declines, but on a quarterly or monthly basis, the data is much more stable.
Earlier this year we reviewed the fairness opinions issued by Morgan Stanley and Barclays for the still pending JetBlue-Spirit merger. In an updated look at the deal, the adage that time is the enemy of all deals comes to mind while pondering Frew’s question from the earlier post of whether JetBlue could close.
In this article we provide a summary of recent specialty finance transactions by bank acquirors. The article dives into the benefits, risks, and key considerations that bank buyers should examine when evaluating a specialty finance acquisition.
Wholesalers seeking a strategic exit may be facing tighter market valuations. But the downside in previously robust transaction trends may represent a silver lining for wholesalers needing to achieve overdue ownership succession and favorable estate planning objectives. In this article we discuss how to take advantage of current market conditions to enhance the outcome of your ownership succession and estate planning strategies.
This is the second of a two-part series where we focus on navigating business valuation complexities in litigation. In this article we discuss multiple valuation dates and opposing expert reports.
During the third quarter of 2023, market expectations solidified that interest rates would remain elevated for some time, contrary to forecasts earlier in 2023 that the Federal Reserve would begin cutting its target Fed Funds rate later in 2023. In this article, we evaluate the effect of a higher-for-longer rate environment on net interest margins, growth strategies, securities portfolio management, credit quality, and M&A.
Valuing a business in a litigation context is akin to navigating a complex maze. This intricacy is amplified when dealing with multi-entity structures, multi-location businesses, multiple valuation dates, and opposing expert reports. In such cases, crafting a well-thought-out strategy is essential to ensure a fair and equitable assessment of the business’s value. This article is the first of a 2-part series that provides strategies on how to proceed in these challenging litigation scenarios. In Part 1, we cover how to handle the complexities involved in valuation a business with multi-entity structures and multiple locations.
Int his article we analyze the trend of higher core deposit intangible (CDI) asset valuations spurred by rising interest rates. We also explore mitigating factors to higher CDI values including an increase in average cost of funds, industry deposit attrition, and shifting deposit mix.
In this article we explore the necessity for detailed forensic investigation to uncover any concealed financial strategies or irregularities that may be deployed in anticipation of a divorce. The stakes are high, and the methods can be intricate, hence the essential role played by financial experts in ensuring accuracy and fairness in the equitable distribution of marital assets.
Determining the value and classification of financial assets can be challenging during a divorce proceeding. The value of a couple’s closely held business could be the most valuable asset in the marital estate. If the business was owned prior to marriage, the identification and quantification of any appreciation as active or passive could be critical to the overall marital value placed on that asset.
Bank stocks have underperformed in the broad market since the beginning of the year and many currently trade below book value, which begs the question, is goodwill impaired? In this article, we discuss two common questions that arise for banks considering an impairment test: do I need an impairment test and how does it work?
Valuation of a business can be a complex process requiring accredited business valuation professionals. Valuations of a closely held business in the context of a divorce are typically multifaceted. Business valuations are a vital element of the marital dissolution process as the value of a business, or interests in a business, impact the marital balance sheet and the subsequent allocation/distribution of marital assets. In this article, we introduce the three valuation approaches and discuss the importance of normalizing adjustments to the subject company’s income statement.
The role of the financial advisor becomes tougher when markets are depressed. Questions of value and fair dealing may be subjected to more scrutiny. Declining or depressed markets in the context of negotiating and opining on a transaction will raise the reasonable question: How do current market conditions impact fairness? In this article we discuss some of the issues that may weigh on the decision process and the rendering of a fairness opinion in a depressed market.
Business owners and their professional advisors are occasionally perplexed by the fact that their shares can have more than one value. This multiplicity of values is not a conjuring trick on the part of business valuation experts, but simply reflects the economic fact that different markets, different investors, and different expectations necessarily lead to different values. Business valuation experts use the term “level of value” to refer to these differing perspectives.
The valuation of portfolio companies usually is a straight forward process; however, it is more challenging in the current bear market following a period of wide-open monetary spigots that drove rich valuations for venture-backed firms. Capital raises were outwardly easy to complete as were richly valued exits via an IPO or M&A. For traditional PE-backed companies, low-cost debt financing was readily available, too, which often supported an extra turn or two of EBITDA for acquisitions and sometimes dividend recaps.
In this article, we step away from the daily drumbeat of questions about bank liquidity, PacWest and CRE loans to review valuation in the context of merger arbitrage. The TD-First Horizon terminated deal highlights why until a deal closes, there is uncertainty for a reason.
This article discusses the concept of fair market value and its various effects. First, we explain what fair market value means. Then, we explore the hypothetical negotiations between potential buyers and sellers when determining fair market value and the implications of these discussions.
Finally, we examine the impact on the so-called “marketability discount for controlling interests” by analyzing this “discount” from three perspectives: the meaning of fair market value, the integrated theory of business valuation, and the recurring and incorrect rationales for this discount.
