When your company is contemplating either a merger or a business acquisition, there are many factors to consider; however, the first and foremost concern will be whether or not the move will benefit your company, now and in the future. You’ll want to ensure that any action taken is monetarily justifiable and that you have an expert opinion to support your decision, so that the banks loaning you the money feel that they are making a worthwhile, secure investment.

men shaking hands next to statistics

Solvency opinions can help you to achieve this. A solvency opinion evaluates a business’s assets, potential sources of revenue and free cash flow, and existing and projected liabilities. This analysis is often performed by a third-party valuation provider to ensure that the merged company will have the financial resources to sustain its operations in the future. This includes the company’s ability to service indebtedness transferred as part of the merger or acquisition, as well as additional indebtedness incurred to finance the proposed transaction.

Finding a Reliable Solvency Opinion Provider

Often, these assessments are requested prior to a merger or acquisition by the company in question on behalf of its financing bank, as the bank needs reliable information in order to make an educated decision. This makes the importance of finding a company with a record of accuracy paramount.

If the merged company ultimately fails, it will put a lot of different people in jeopardy: banks providing financing run the risk of not being repaid; the company itself may reach bankruptcy and its shareholders may be at risk; and any third-party provider of the solvency may be liable for its inaccuracy. A qualified firm will be able to look at the facts and figures of the case and make an accurate financial prediction as to the solvency of a company. In addition, this valuation can also be admitted in court as evidence of solvency – something that goes a long way in bankruptcy cases in which your company has a priority position for any repayment.

If your company needs a solvency opinion, Appraisal Economics can assist. We use an in-depth, highly refined process to measure the financial tests for solvency, analyzing your assets, liabilities, and capital adequacy and those of the company you are merging with or acquiring. This will yield information that can be used to determine the potential profitability of a venture for the use of your financial backers.