Publicly Traded Industrial Company Spin-off - Solvency Opinion

The board of directors of a $5 billion publicly traded industrials company planned to spin-off an ancillary business line in order to segregate it from its core business. Stout was engaged to advise the board on the proposed transaction and issue a solvency opinion on the ability of both companies to remain operational and solvent on a stand-alone basis after the proposed separation.

Our analysis relied on projected cash flows via a discounted cash flow analysis as well as an analysis of the trading multiples of publicly traded companies and recent mergers and acquisitions of similar companies. We conducted a cash flow test analysis to determine the ability for both companies to satisfy their post-spin-off debt obligations. The analysis also presented a downside case scenario in an effort to provide management with a sensitivity analysis on each company’s ability to continue satisfying its debt obligations in the event of unexpected business pressures resulting in lower-than-expected future cash flows.

Stout's independence from both companies was a key factor in helping the board obtain the comfort level and confidence they needed in order to move forward with the transaction.

Related Professionals

All Related Professionals