Provided solvency opinion to $30 billion publicly traded automotive technology company

Provided solvency opinion to $30 billion publicly traded automotive technology company

Solvency Opinion – Publicly Company Spin-off

The board of directors of a $30 billion publicly traded automotive technology company planned to spin off a business segment in order to create two independent companies. Each company would have a distinct product focus to provide flexibility to pursue accelerated investments in advanced mobility technologies related to safer, greener, and more connected solutions for transportation, including advanced safety, automated driving, user experience, and connected services. Our experience related to analyzing the value drivers of advanced automotive technology was a key factor in the selection process. We were 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, contemplating the pro forma capital structure subsequent to the proposed separation.

Our analysis relied on projected cash flows via a discounted cash flow analysis as well as an analysis of the pricing 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, such as an economic downturn, resulting in lower-than-expected future cash flows.

Our experience within the automotive technology space enabled the execution team to provide value and insight. 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.