Stout was engaged to estimate the fair value of certain assets acquired and liabilities assumed in the transaction involving the purchase of RedCard Systems by Zelis Holdings, L.P. on October 1, 2019, for total purchase consideration of approximately $5.7 billion.

The transaction structure enabled Zelis to step up the basis of its assets, which consequently added complexity to the analysis. RedCard was comprised of two reporting units: Claims Cost Solutions and Payments Optimization. Zelis’ existing payments reporting unit was also combined into RedCard’s Payments reporting unit. The total consideration needed to be allocated to each reporting unit as they would be structured following the transaction, which required an independent determination of fair value of the reporting units. The individual assumptions and overall fair values of each reporting unit had to reconcile with the overall transaction value to ensure the allocation was reasonable.

Our analysis was utilized by Zelis management to satisfy financial reporting requirements and tax requirement and provided a significant tax benefit for the Company.