Case Studies

Marshall & Stevens regularly publishes case studies to advice professionals, students, employees, and clients on current valuation situations, techniques, and solutions.

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.

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

1. The fair value of the company’s assets would exceed the total amount of the company’s debts;
2. It was reasonable to anticipate that the company would be able to pay its debts as they become due;
3. The company would have a reasonable amount of capital with which to engage in its business;
4. 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
5. 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.

CARRYING VALUE 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.

ALLOCATION OF PURCHASE PRICE - Two equity firms acquired a manufacturer of ceiling fans, humidifiers, air purifiers, and thermostats. The firms provided $29 million and $25 million combined with $11 million in mezzanine debt, respectively. The financing consisted of 40% equity and 60% debt. This new entity would subsequently be acquired for $244 million, with one-third being funded by equity and $160 million in debt raised by JP Morgan. The financial and asset valuation specialists at Marshall & Stevens provided the purchase price allocation for financial reporting purposes on the initial purchase and subsequent acquisition.

TWO PORTFOLIO COMPANIES - Two portfolio companies engaged Marshall & Stevens to value their businesses and determine the extent of their insolvency to assess how much, if any, debt forgiveness would be taxable under IRC Section 108.

SOLVENCY OPINION AND CHEAP STOCK ANALYSIS - An equity firm purchased a designer, manufacturer, and marketer of premium scented candles. The purchasing funds consisted of $177 million in equity and $320 million in subordinated debt to acquire a 90% in the entity through a recapitalization. The acquired company requested that Marshall & Stevens prepare a solvency opinion concerning whether, after giving effect to the recapitalization the fair value of its assets exceeded its debts; whether it was able to pay its debts as they became due; and whether it had reasonable capital for the ongoing conduct of its business. Prior the initial public offering of its stock, the purchased company engaged Marshall & Stevens to perform several cheap stock opinions to determine compensation expense.