Marshall Stevens: Case Studies

Case Studies

+ Fairness Opinion Case Studies
+ Solvency Opinion Case Studies
+ Capital Asset Review and Evaluation Services Case Study
+ Gaming Industry Case Study
+ Fashion Industry Case Study
+ Private Equity Case Study
+ Transaction Engagement Case Study

Fairness Opinion Case Studies

Marshall & Stevens provided a Fairness Opinion to the Special Committee of the Board of Directors of Sport Supply Group, Inc. (“SSG”) (AMEX: RBI) regarding the company’s merger with Collegiate Pacific, Inc. (AMEX: BOO). Marshall & Stevens found the consideration being paid by Collegiate Pacific to be insufficient and, at the request of the Special Committee of SSG’s Board of Directors, negotiated consideration superior in total amount and structure for SSG’s shareholders. The transaction subsequently closed as revised.

Marshall & Stevens issued a Fairness Opinion to the Board of Directors of Host America Corporation (OTCPK: CAFE) regarding the sale of its operating subsidiary, Host America Corporate Dining (“Corporate Dining”), to a private buyer. After considering Corporate Dining’s forecasted earnings and market conditions, we concluded that the consideration to be received by Host America’s shareholders was fair from a financial point of view. The transaction closed on time and as structured.

Marshall & Stevens was engaged by the Board of Directors of Point.360 Group (NasdaqGM: PTSX) to provide a Fairness Opinion with respect to the sale of a significant business unit of Point.360 to DG FastChannel (NasdaqGM: DGIT). In addition, Marshall & Stevens was retained to prepare a Fair Market Valuation of Point.360’s remaining business to establish the value of the company’s publicly traded stock post transaction. We concluded that the sale was fair to Point.360’s shareholders from a financial point of view and the transaction closed on schedule as structured.

Marshall & Stevens was engaged by the Special Committee of the Board of Directors of Inland Real Estate Group of Companies, Inc. (“Inland Real Estate”) (NYSE: IRC) to provide a Fairness Opinion concerning Inland Real Estate’s transfer of a retail shopping center in Terra Haute, Indiana into a joint venture. The engagement included Marshall & Stevens’ valuation of the underlying real estate. We concluded that the transaction was fair from a financial point of view and it closed on time and as structured.

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Solvency Opinion Case Studies

In each of the following two representative engagements Marshall & Stevens applied solvency tests to determine if, post transaction:

The fair value of the company’s assets would exceed the total amount of the company’s debts;
It was reasonable to anticipate that the company would be able to pay its debts as they become due;
The company would have a reasonable amount of capital with which to engage in its business;
Based on the financial projections provided by management, it was reasonable to anticipate that the company would satisfy the financial covenants listed in the loan agreement for each of the forecasted periods; and
Assuming that the company performed at the levels projected by management, it was reasonable to anticipate that the company would be able to refinance the balloon payment of the subject debt securities at maturity.

The private equity investor in a privately-held apparel company had structured a leveraged recapitalization of the company, including the issuance of $85 million in new debt securities. The use of proceeds from the transaction included a shareholder distribution. Marshall & Stevens was engaged by the company’s board of directors, for the benefit of shareholders and lender, to determine whether the company would be solvent after giving effect to the transaction. Marshall & Stevens applied the financial tests described above and determined that the company would remain solvent. The transaction closed as structured.

Marshall & Stevens was engaged by the company, for the benefit of shareholders and lender, to render an opinion as to the solvency of the company after giving effect to the company’s proposed issuance of $298 million in new debt securities. The company’s intended use of the new funds was to: (1) repurchase outstanding shares of the company; (2) refinance existing debt securities; (3) pay transaction fees and other expenses associated with the transaction; and (4) fund general corporate needs. Marshall & Stevens applied the financial tests described above and determined that the company would remain solvent. The transaction closed as structured.

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Capital Asset Review and Evaluation Services: C.A.R.E.S.

Background
Phantom Assets are assets that no longer physically exist within an organization yet remain on the books. These assets can negatively impact:

Insurance premiums
Personal property tax bases
Depreciation schedules and earnings.

Fixed assets are a significant portion of most companies’ Balance Sheet. Companies retire assets, purchase replacements and perform repairs on an ongoing basis. Over time, book and tax values reported for a plant or facility may not truly reflect the assets at a location. A detailed fixed asset study will determine that a percentage of the assets, studies have shown 10-15%, on the books are no longer in use, cannot be located, or are being cannibalized for parts.

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Gaming Industry Case Study

Large gaming company owns and operates casinos in multiple states. For this study, Marshall & Stevens analyzed five facilities with a gross value of over $200 million and a net book value of approximately $63 million. M&S assessed the properties’ records and the assets’ life cycle, segregated the value of the gaming equipment between software (non-taxable) and hardware (taxable). Renovations were also reviewed and booked to reduce tax exposures. A substantial amount of assets was identified as missing & expunged from the fixed asset record to create a clean fixed asset register. As a result of this study, M&S found approximately 22% of the NBV to be phantom assets that were still being recorded on the asset ledgers. Thanks to CARES, the property tax savings in just the first year were double that of our fee.

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Fashion Industry Case Study

Fortune 500 clothing company runs worldwide retail and office operations. For this study, M&S analyzed 14 million square feet of space in U.S. locations, which included 16 distribution centers, 4 IT centers, 6 office complexes and design studios. This was a joint project with thr company’s internal auditors, -based on Sarbanes-Oxley financial reporting standards. M&S performed a complete physical inventory analysis capturing all pertinent asset data in order to optimize return-on-assets. As a result of this detailed study, M & S identified 32%phantom assets that were still being recorded on the books. The property tax savings were four (4) times our fee.

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Private Equity Case Study

An equity firm raised $750 million for a new fund. Before investing any of the dollars, the financial valuation specialists at Marshall & Stevens were contacted by a prominent corporate attorney to produce a defendable value for transfer of a minority interest in the fund into a FLP.

The experience of our professionals in valuing partial interests, including blocks of restricted stocks, for merger, acquisition and wealth transfer transactions made this a very credible study with significant discounts attributed to the value of the shares transferred.