Valuation analysis is a substantial part of securities and financial markets litigation. The analysis used to value complex security instruments requires a thorough understanding of the facts and issues. To this end, The Brattle Group combines in-depth industry experience and rigorous analyses using sound economic and financial principles to help clients answer complex valuation and financial questions in litigation.
Valuation analysis is a common approach in disputes associated with bankruptcies, buyouts, divestitures, initial public offerings, going-private transactions, mergers and acquisitions, private placements, and reorganizations. Valuation analysis is also common in disputes that focus on debt, derivative securities, and intellectual property rights.
The Brattle Group’s litigation experts have extensive experience with valuation analysis such as appraisal of fair value, estimation of cost of capital, and disputes associated with minority shareholder, M&A, and post-merger disputes. Our expertise is grounded in a thorough understanding of finance and economics, accounting, financial products, capital markets, regulation, and industry custom and practice.
On behalf of the special committee to the board of directors for a major international telecommunications provider in bankruptcy proceedings, The Brattle Group provided forensic analysis of the economics, financial reporting, and accounting associated with the company’s bankruptcy. The engagement involved contemporaneous review and analysis of telecom market structure and trends, capacity and pricing projections in international markets, business justification of certain transactions, and appropriateness of the accounting for these transactions. The project also involved econometric event study analysis and the estimation of the impact of quarterly earnings announcements on equity prices and enterprise value.
The Brattle Group built real options models for the drug development process for 19 drugs in various stages of clinical progress. We valued the profit split on the potential returns of these drugs between small biotechnology firms and the large pharmaceutical firms with whom they entered into business alliances. We analyzed the terms of the development contracts and the assumptions on revenues, manufacturing costs, clinical trial expenses, cost of capital, and itemized income statement expenses.
On behalf of an investment management company, we were retained to prepare expert testimony on valuation principles used to price privately held minority shares in a global financial institution with assets of about $150 billion. The majority shareholders of the institution forcibly repurchased the shares of the minority shareholders at a price determined by the board based on two valuation studies prepared for them. Our client, a large minority shareholder, filed a lawsuit against the institution based on the belief that the repurchase price undervalued the privately held shares. The arbitration panel ruled that the repurchase price did undervalue the privately held shares and ordered the institution to make additional payments equal to about fifty percent of the original repurchase price.
We worked on behalf of a large, publicly held company in the energy sector that was involved in a breach of contract case associated with an aborted merger transaction. We performed forensic accounting services and developed an economic analysis of material adverse change and our experts also analyzed potential exposure related to allegations of violations of Rule 10b-5.
Lehman claimed foreign tax credits of nearly $500 million stemming from stock lending transactions. The IRS denied these credits and Lehman’s bankruptcy estate sued the U.S. government to recover these credits. Brattle economists evaluated the business purpose of the transactions giving rise to the tax credits. We also evaluated the profitability of these transactions with and without the claimed tax credits and compared these transactions to Lehman’s other stock borrowing and lending activity with respect to frequency, timing, size, duration, profit margin, counterparty, method of collateralization, and other characteristics.
For the plaintiff in litigation over the sale of a group of companies and the attendant default on pension obligations, The Brattle Group performed analyses of financial statements and business plans, and developed discounted cash flow valuations for each of the transferred units. We used option valuation techniques to characterize the components of the contracts and examined interactions with other corporate units in an option pricing framework. We also recruited and coordinated five testifying experts. Our testimony spanned a variety of areas including damages, accounting issues, business practices, and pension valuation inputs.