Bankruptcy & Restructuring Valuation Services
Under U.S.C. Title 11, bankruptcy establishes the legal procedures available to businesses that cannot meet their debt obligations. In every proceeding, the value of the business and its assets is the central question every party needs answered. The type of proceeding determines the required standard of value, and an independent, court-ready appraisal gives that answer weight. Appraisal Economics provides restructuring and bankruptcy valuation services for debtors, creditors, trustees, and legal counsel navigating financially distressed situations.
Bankruptcy and Restructuring Valuation: What the Work Covers
When a company enters financial distress, the path forward depends on which legal framework applies and what the parties are trying to achieve. Appraisal Economics supports all three common approaches.
Chapter 7: Liquidation
Chapter 7 is the liquidation path. A court-appointed trustee takes control of the debtor’s assets and sells them to satisfy creditor claims in order of priority. Valuations in this context focus on what assets will actually yield when sold under existing conditions, which is rarely book value and almost never going-concern value. Appraisal Economics provides opinions on orderly liquidation value and forced liquidation value that reflect actual market dynamics rather than theoretical maximums.
Chapter 11: Reorganization
Chapter 11 allows a debtor to continue operating while restructuring its obligations under a court-approved plan. Bankruptcy valuation under Chapter 11 serves multiple purposes at once: it establishes the reorganization value of the enterprise, supports plan confirmation, determines how the reorganized equity is distributed among creditors, and forms the basis for fresh start accounting when the plan takes effect. Appraisal Economics supports debtors, creditors’ committees, and individual creditors throughout the Chapter 11 process.
Out-of-Court Restructuring
An out-of-court restructuring is typically faster and less expensive than a formal bankruptcy filing. Because it preserves the debtor’s control and avoids the operational disruption of a court proceeding, it is often the preferred path when creditors and the debtor can negotiate an agreement. Restructuring valuation remains important in this case, as it establishes the basis for negotiation and creates a documented record that the agreed terms reflect the business’s actual economic value, which matters if the transaction is later challenged.
Asset Types Covered
Appraisal Economics provides comprehensive appraisal capabilities across all asset classes involved in corporate restructurings and distressed situations. These asset classes encompass both tangible property, such as real estate, machinery, equipment, land, and buildings, and critical intangible assets.
While intangible assets such as proprietary technology, patents, trade names, copyrights, and customer relationships are often omitted from the balance sheet at fair value, they frequently hold substantial value during a corporate reorganization. Because every asset class directly impacts fresh-start balance sheets, plan feasibility analysis, and creditor waterfalls, reliable valuations from precise asset appraisals are vital in distressed engagements.
Methodology and What Clients Receive
The appropriate standard of value depends on the purpose of the engagement. Appraisal Economics determines and applies the correct standard for each context and documents the reasoning behind that selection in the formal report.
Orderly Liquidation Value estimates what a business would receive for its assets if sold over a reasonable period, allowing for proper marketing to qualified buyers. It applies when a liquidation is anticipated but is not being conducted under artificial time pressure or in conditions of immediate distress.
Forced Liquidation Value reflects what assets would yield at an immediate sale, typically at auction, with limited time for marketing, buyer due diligence, or asset inspection. This is the relevant standard for secured creditors assessing their collateral coverage in a worst-case scenario.
Going Concern Value assumes that the business will continue to operate as an integrated enterprise. It applies in reorganization proceedings where the debtor intends to emerge from bankruptcy as an ongoing business, and it typically reflects a higher value than either the liquidation standard because it captures the worth of the business as a functioning whole.
Reorganization Value is the value of the reorganized entity on emergence from bankruptcy, determined through a discounted cash flow analysis, a comparable company analysis, or a combination of both. It is the foundation for the plan of reorganization and determines how reorganized equity is allocated among creditors.
Appraisal Economics delivers formal written appraisal reports that meet the evidentiary standards required by bankruptcy courts. Every report documents the methodology applied, the assumptions on which the analysis rests, the data sources relied upon, and the conclusion reached. Where court testimony is involved, opinions are prepared to withstand cross-examination and Daubert scrutiny from the outset.
Why Choose Appraisal Economics Bankruptcy & Restructuring Valuation Services
Independence is the foundation of a credible bankruptcy valuation. A valuation firm that has audit, tax, or advisory relationships with the debtor or its creditors faces inherent conflicts that undermine the weight of its opinions in court and in negotiation. Appraisal Economics is a pure-play firm, meaning valuation is the only service we offer. We have no audit relationships, no tax practices, and no restructuring advisory business that could create a conflict of interest or divide our focus.
Our team includes Chartered Financial Analysts (CFAs), Accredited Senior Appraisers (ASAs), CPAs, economists, and engineers with experience across the asset classes most commonly at issue in distressed situations. We have supported bankruptcy and restructuring engagements on behalf of debtors, secured and unsecured creditors, official committees, and court-appointed trustees.
Where engagements involve litigation, we provide expert witness testimony. Our professionals are experienced in presenting valuation opinions in adversarial settings, including depositions and bankruptcy court hearings, and our reports are structured with that possibility in mind from the first day of the engagement.
Distressed situations also demand speed. Court deadlines, plan confirmation schedules, and creditor negotiations do not accommodate unhurried timetables. Appraisal Economics has the internal capacity to staff time-sensitive engagements with the depth the timeline requires without compromising independence or the quality of the work product.
What Trustees, Lenders, and Counsel Ask
What types of valuations are typically required in a Chapter 11 bankruptcy?
Chapter 11 proceedings commonly require several distinct valuations depending on where the case stands. Early in the proceeding, secured creditors may request adequate protection valuations to establish collateral coverage. As a plan develops, both the debtor and creditors need a reorganization value for the emerging entity. If the plan results in fresh start accounting, a comprehensive asset appraisal as of the plan’s effective date is required. Solvency opinions may also be necessary if prior transactions are being challenged as fraudulent transfers.
What is the difference between orderly liquidation value and forced liquidation value?
Both standards apply in liquidation scenarios, but they reflect different assumptions about the timing and conditions of the sale. Orderly liquidation value assumes that assets are marketed to qualified buyers over a reasonable period, allowing the seller to achieve pricing closer to market value. Forced liquidation value assumes an immediate sale, typically at auction, with limited time for buyer review. Forced liquidation values are generally lower and are the appropriate standard when a secured creditor needs to assess its worst-case collateral coverage.
What is going concern value and why does it matter in a reorganization?
Going concern value assumes the business will continue to operate as an integrated, functioning enterprise rather than being sold in parts. It reflects the value of the business’s cash flows, customer relationships, workforce, and operational infrastructure as a whole. This value is typically higher than either liquidation standard because it captures the economic benefit of the business remaining in operation. It is the relevant standard when the debtor intends to emerge from bankruptcy and continue operating under a reorganized structure.
When is an independent bankruptcy valuation required?
Bankruptcy courts regularly require independent valuations to resolve disputes between debtors and creditors, confirm plans of reorganization, and rule on adequate protection motions. Out-of-court restructurings do not carry the same mandatory requirements, but creditors and debtors routinely commission independent valuations to establish a credible basis for negotiation and to reduce the risk of later challenges to the terms agreed upon.
Can Appraisal Economics provide expert witness testimony in bankruptcy proceedings?
Yes. Our professionals have served as expert witnesses in bankruptcy and adversary proceedings, as well as related litigation. Our opinions are prepared to meet the Daubert standard for expert testimony in federal court, meaning the methodology is documented, the assumptions are supported, and the conclusions are defensible under cross-examination.
What is fresh start accounting and what does it require from a valuation standpoint?
Fresh start accounting applies when a company emerges from Chapter 11 and meets the criteria established under ASC 852, the accounting standard governing reorganizations. Under fresh start reporting, the reorganized entity restates its balance sheet to reflect the fair values of its assets and liabilities as of the emergence date, effectively starting with a new cost basis. This requires a comprehensive appraisal of all assets, both tangible and intangible, as of the effective date of the plan.
How does restructuring valuation differ from a standard business valuation?
A standard business valuation typically establishes the fair market value of a going concern under ordinary conditions. Restructuring valuation must address multiple standards of value simultaneously (liquidation, going concern, and reorganization) and account for the specific legal and procedural context of the distressed situation. In contrast to a standard transaction involving typical buyers and sellers, a restructuring valuation report is intended for a specialized audience. The primary readers include judicial courts, creditors’ committees, and opposing legal counsel, each of whom will meticulously evaluate and question all underlying assumptions and valuation methodologies.
What industries does Appraisal Economics serve in bankruptcy and restructuring engagements?
Appraisal Economics has worked across a broad range of industries. The asset types that appear in distressed situations vary significantly by industry, and our team includes specialists in the asset classes most commonly at issue in bankruptcy proceedings: machinery and equipment, real estate, intangible assets, and complex securities.