Many factors must be taken into account when determining the value of a business or intellectual property. Internal factors, such as financial performance of the asset, and external factors, such as market conditions, impact value. Valuation is not a formula but a science that involves gathering and analyzing all the relevant facts and filtering this information with the funnel of a qualified expert’s judgment and experience. The Hemming Morse team possesses a wealth of knowledge and depth of expertise to ensure accurate and relevant results for business owners and managers, attorneys and financial advisors.
Our professionals perform valuations for businesses spanning multiple industries, including manufacturing, retail, technology, life sciences, medical devices, agriculture, professional services, food service and hospitality, applying rigorous professional standards to ensure the highest quality work product. Hemming Morse has handled many high exposure assignments involving strategic sales, IPOs, reorganizations and corporate restructurings for transactions up to and exceeding $1 billion.
Effective Resolution of Shareholder Dispute
Hemming Morse team helps obtain settlement over four times higher than initial offer in shareholder dispute.
The Hemming Morse team was engaged by the founders and operators of a wholesale food distribution business that had grown to several hundred million in revenues. Having sold the majority of their interest to an investor group – retaining a put option on the minority stake, we were brought in when the put option came due and a below market value for the clients’ remaining interest had been offered. The matter also involved allegations that the opposing party had mismanaged the business and breached its fiduciary duty to the minority shareholders by running significant personal expenses through the company. Our team performed an extensively researched valuation analysis, uncovering expenditures unrelated to business operations. We then worked with counsel and our client to craft an effective negotiation strategy. Within two months of our engagement, our client realized an out-of-court cash settlement 4.5 times more than the initial amount offered by the opposing party.
Preparing for an Initial Public Offering
Hemming Morse assists in getting to successful IPO, avoiding cheap stock restatement and related tax exposure.
The Hemming Morse team was retained by a fast-growing networking device company with the goal of achieving an initial public offering (IPO) within two years. Initially, the company was internally funded, did not have any audited financial statements, and lacked a robust accounting and finance team. A private equity group was brought in to provide growth capital, and a new management team and audit process with a “Big 4” accounting firm were established to take the necessary steps to make the IPO happen. Our team was engaged as the company’s valuation expert for stock options issuance under IRC 409A, a key aspect of incentivizing the management team and employee base to achieve the IPO. During a two-year period, we guided the management team on the valuation implications of multiple complex and fast moving issues, including:
- A $100 million private equity investment for preferred shares.
- Redemptions of founder common shares on the same terms as preferred securities.
- Strategic acquisitions.
- Constantly changing financial statements through the audit process, and coordination with the audit team on preparing timely valuation drafts, as well as addressing auditor due diligence on our work.
- Fast-growing trajectory of the company, fluctuating margins and appropriately assessing many uncertain variables that are material to estimating the company’s value.
- Estimated range for the IPO pricing, and significant variance in that range leading to the public offering.
Ultimately, the client benefited from our well-seasoned professionals’ experience to incentivize its management team, achieve a timely public offering and successfully manage the significant tax and financial reporting exposure related to equity-based compensation.