Transaction Advisory

Spirit Airlines filed for bankruptcy on November 18, 2024. We will see creditors take control of the company after a nearly two-year saga involving Frontier Airlines, JetBlue and the Department of Justice successfully suing to block the proposed merger with JetBlue. Hindsight is easy, but the Spirit board made a disastrous decision like Richard Fuld in attempting to strike a better deal when the market signaled otherwise.

A quality of earnings (“QoE”) report and an audit are both essential tools in the business world, but they serve distinct purposes and offer varying insights.  Audits are broader and regulatory in nature, whereas QoE analyses are more focused and strategic, catering to the needs of investors and decision-makers who require a deeper understanding of a company’s true financial health and future potential.

The cost of corporate M&A failures is high for both buyers and sellers. These high stakes mean that thorough and high-quality due diligence is critical.  A Quality of Earnings (or QofE) analysis is an essential component of transaction diligence for both buyers and sellers.  Optimizing your transaction diligence requires assembling the right team. In this article, we discuss four things buyers and sellers should look for when evaluating potential QofE providers.

M&A deal flow was sidelined for much of 2022 and 2023, but the economy’s soft landing, stabilizing interest rates, and pent-up M&A demand are expected to compel buyers and sellers to renew their efforts in 2024 and beyond. As deal activity recovers, sellers need to be prepared to present their value proposition in a compelling manner. 

For many sellers, an independent Quality of Earnings (“QofE”) analysis and report are vital to advancing and defending their asset’s value in the marketplace.  And it can be critical to the ensuing due diligence processes buyers apply to targets.

In this article, we review five reasons sellers benefit from a QofE report when responding to an acquisition offer or in preparing to take their businesses to market.

In 2024, as the prospect of Fed rate cuts begins to attract buyers back into the market after a period of caution in 2022 and 2023, the importance of thorough due diligence cannot be overstated.

Management should pay close attention to the crucial role that a Quality of Earnings (“QofE”) report can play in their acquisition decisions.

From uncovering sustainable earnings and identifying cost-saving potentials to understanding revenue synergies and assessing capital needs, a comprehensive QofE report emerges as an indispensable tool for business directors aiming to navigate the complexities of acquisitions with confidence and strategic insight.

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.

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.

A tough call for the merger arbitrage community: $25 per share cash deal closes; regulators reject the deal, causing First Horizon National to trade freely in a tough market for bank stocks; or the parties extend the merger agreement again, but does the price get renegotiated?

The tussle involving Frontier Group Holdings, Inc. and JetBlue Airways Corporation over Spirit Airlines has been decided in favor of JetBlue. In this article we take a look at the fairness opinions rendered by Morgan Stanley and Barclays, then concludes by asking a pertinent question the market seems to have answered even if the board answered in a nuanced way.

In this article we provide a broad overview of PPAs and then a deeper look into the pitfalls and best practices related to them.

Not only is a solvency opinion a prudent tool for board members and other stakeholders, but the framework of solvency analysis is ready made to score strategic alternatives and facilitate capital deployment.

Directors are periodically asked to make tough decisions about the strategic direction of a company. Major acquisitions are usually one of the toughest calls boards are required to make. Buy-side fairness opinions have a unique place in corporate affairs because the corporate acquirer has to live with the transaction. What seems fair today but is deemed foul tomorrow, may create a liability for directors and executive officers. This can be especially true if the economy and/or industry conditions deteriorate after consummation of a transaction.

In March of 2016 Elon Musk was laying the ground work for the merger of Telsa, Inc. and SolarCity Corporation. This presentation looks at the issues raised by plaintiffs who alleged Musk orchestrated the deal to bail-out SolarCity, and how the Delaware Court of Chancery ruled on the issues on April 27, 2022 under the entire fairness standard rather than deferential business judgment rule.

Contingent consideration is a common feature of M&A when both parties are private, or the acquirer is public, and the target is private. There are many forms of contingent consideration in M&A. These include post closing purchase price adjustments that can alter total transaction value or that can alter the payment and realization of net proceeds through the recovery of transaction set-asides such as escrow balances or the payment of holdbacks and deferrals.

This is the sixth article in a series on buy-side considerations. Our focus in this article is on understanding how and why net working capital targets are crucial for buyers looking to negotiate deals that look good at closing and pass the test as the buyer takes over the operation of the newly acquired business.

In this series of articles, we cover buy-side topics from the perspective of middle-market companies looking to enter the acquisition market. Read the articles in this series.

This is the fifth article in a series on buy-side considerations. In this series, we will cover buy-side topics from the perspective of middle-market companies looking to enter the acquisition market. Our focus in this article is on how the quality of earnings (QoE) analysis can help acquirers better analyze possible acquisition targets.

Many acquirers buy businesses at a value higher than this intrinsic value, paying what is referred to as a strategic premium. In this post we discuss the theory behind strategic premiums, and how they can be advantageous or detrimental to acquirers.

When considering a buy-side transaction to expand, many middle market companies may not consider a merger transaction as an option compared to an outright acquisition. Mergers are often seen as transactions for big conglomerate-type companies on Wall Street, but they can be effective for middle-market businesses as well. In this article we discuss the key questions that must be addressed when considering a merger transaction, including, corporate governance, social issues and economic questions.

This is the second article in a series on buy-side considerations. In this series, we will cover buy-side topics from the perspective of middle-market companies looking to enter the acquisition market. Our focus in this article is to summarize some practical considerations for approaching and vetting an identified target.

With aggregate M&A activity setting records in 2021 and continuing a strong pace in 2022, many businesses are exhibiting a thirst for growth or conversely their shareholders are eyeing an exit at favorable valuations. This article provides touch points and practicalities for identifying viable merger and acquisition targets and assessing strategic fit.