An early stage pharmaceutical company with one major lead in clinical trials and awaiting FDA approval needed additional funding to finance research and development expenses associated with the drug development. To meet its financing needs, the company issued a convertible callable note which included attached warrants and other features qualifying them as embedded derivatives. In order to comply with Accounting Standards Codification 815 (ASC 815), the company asked VRC to analyze the entire note and determine the fair market value of each of the embedded derivatives.
Our analysis detailed the various embedded features, such as the conversion right of the investor to convert into shares of common stock of the company, prepayment rights of the issuer of the note, additional warrants to be issued upon early prepayment of the notes, and interest rate step-up in case of technical default, among other provisions.
We developed a proprietary model that valued the entire note, with the exception of stand-alone pieces, such as the attached warrants. Using this model, we were able to analyze the effect of each of the embedded features on the value of the note. By valuing the note with and without certain features and analyzing the difference between the value indications, we were able to value each feature within the context of the note.
By using an integrated approach, we were able to pinpoint how investors’ and issuer’s behaviors affect each other and, therefore, determine the value of the embedded derivatives. This approach allowed us to value each embedded derivative on the basis of being part of a complex note, which is not simply the sum of the values of several stand-alone securities or derivatives. This approach enabled us to calibrate the model used to the actual face value of the notes, thus adding an extra layer of reliability. Our final valuation of each of the embedded derivatives was reviewed and approved by the company’s Big 4 auditor.
A leading commercial agribusiness client in Argentina was interested in selling their company, which was focused on cultivating and producing olive oil, table olives and wines.
An industrial property consisting of various manufacturing machinery & equipment was a candidate for an ad valorem tax reduction.
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Brands: Food & Beverage
A leading manufacturer of branded food products engaged VRC to estimate the fair value of certain intangible assets acquired in a business combination.
We were retained by an energy production company whose subsidiary acquired distressed energy assets from an energy & production company. In selecting a valuation methodology, we needed to consider the significant divergence in the enterprise value of the business versus the un-discounted value of the assets given the dramatic drop in commodity prices at the time.
A brand valuation that estimated the fair value of intangible assets acquired in a business combination was needed by a personal care product company for the sale of its branded and private label products.
A leading international producer of nitrogen products acquires a nitrogen manufacturing company requiring a valuation for allocation of purchase price according to ASC 805.
Oil & Gas
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A private equity sponsored cloud based provider of manager content, enterprise lending services granted certain management incentive units to participating executives, as compensation to incentivize management performance.
A PE-sponsored cloud based provider granted equity compensation incentives to executives. To comply with financial reporting requirements of Accounting Standards Codification 718 (ASC 718), the provider engaged VRC to determine the fair value of the issued units.
A large multinational consumer products company acquired a South American company operating in the same space. VRC was engaged to estimate the value of the PP&E and intangible assets for financial reporting purposes.
Financial Sponsor: Hedge Fund
A shareholder of a closely-held hedge fund was not receiving the appropriate level of compensation per agreement with the controlling interest shareholder.
Financial Sponsor: Private Equity
A technology company was purchased by large private equity investor. With the purchase price set, the new entity was capitalized with debt and three different types of equity securities.
Property taxes were levied on only real property portion of a hospital, key to analysis was separating the value of the business ops from that of real property.
Financial Sponsor: Hedge Fund
A hedge fund client held convertible note in a company that restructured outstanding debt. As part of restructure, the note was exchanged for two separate Term Loans.
We were retained by a leading provider of wireless messaging and information services to provide various valuation services for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
VRC was asked by the attorneys representing the seller to provide multiple common stock valuations on a retrospective basis that would withstand a Big 4 audit review under tight deal closing deadlines.