Fairness Opinions & Valuations

Analysis of valuations and fairness opinions are critical tools used by companies in exercising appropriate fiduciary responsibility when evaluating transactions that may involve conflicts of interest. CSG delivers fairness opinions and valuation analyses to boards of directors, independent committees and interested investors in connection with mergers, acquisitions, management buyouts and other similar transactions. In preparing such opinions and analyses, CSG employs a number of methodologies, including:

Comparable Company Analysis

CSG, through discussions with management and independent analysis, selects publicly traded companies operating in the same arena as the company undergoing analysis. Market multiples are then calculated and compared, including: (i) TEV/revenues, (ii) TEV/EBITDA, (iii) TEV/EBIT and (iv) MV/income. Significant statistics and ratios (as appropriate to the industry) are analyzed in the context of such multiples, such as (i) book value, (ii) tangible book value, (iii) customer acquisition costs, (iv) inventory turns, (v) receivable days and (vi) payable days. These multiples are then used as a basis to calculate potential valuations.

Comparable Transactions Analysis

In a similar fashion, CSG selects certain mergers and acquisitions transactions that have been announced or contemplated involving similar companies. As described above, market multiples are then calculated using announced or contemplated pricing instead of trading value, and these multiples are then utilized to calculate potential value.

Discounted Cash Flow Analysis

When appropriate, CSG utilizes a traditional discounted cash flow methodology in determining value. Based on management provided financial projections, free cash flows are calculated and adjusted as necessary. A terminal value is determined and the stream of cash flows and terminal cash flow are discounted using a range of discount rates. A range of applicable firm values is thus presented.

Other Factors

Certain other analyses are utilized and other matters examined in these circumstances including (i) trading history when publicly traded, (ii) liquidation analysis, (iii) business and operational synergies and (iv) additional market criteria.

When rendering fairness opinions and providing valuation analyses, CSG undertakes due diligence from a financial standpoint as well as conducts site visits and interviews with senior management. When appropriate, legal, accounting and tax advisors are consulted.