Bankruptcy and Financial Distress
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With one of the largest in-house teams in the economic consulting world, NERA combines expertise in economics, finance, accounting, and valuation with specific industry knowledge to provide best-in-class bankruptcy and financial distress litigation support. NERA experts provide economic analysis for securities disputes, corporate governance, valuation of companies, portfolios including assets and derivatives, and professional compensation. In addition to employing standard valuation methods, we draw on advanced valuation techniques and econometric and statistical models.
Our economists have advised on a number of disputes including plan confirmation, preference and fraudulent conveyance claims, solvency and valuation disputes, alleged breaches of fiduciary duty by directors and officers of distressed companies, lender liability claims, and the feasibility of alternative restructuring plans. Our experts also frequently provide testimony for liability and damages, solvency and capital adequacy analysis in fraudulent conveyance and bankruptcy, and the valuation of assets—including enterprises and intangible assets, derivatives and complex securities, and assessments of the reasonableness of certain assumptions used in valuation. We use market indicators such as credit default swaps, cash flow analysis of the effect of transfers on the solvency and capital adequacy of the debtor, econometric modeling for assessing projections, and the valuation of long-tailed liabilities or other disputed claims to provide trusted advice.
Fraudulent Conveyance and Solvency Analysis
NERA experts estimate the range of reasonable projections to determine whether a particular action was justifiable in a fraudulent conveyance action. Our experts analyze whether the transferor was solvent or adequately capitalized at the time of the transfer and whether adequate consideration was received. We investigate fundamental approaches to determining the solvency value of a firm and estimate the probability of bankruptcy.
NERA also uses option techniques to determine how the value of an asset in a firm’s possession would affect the value of shareholders’, bondholders’, and other stakeholders’ financial positions. Our related cash-flow-at-risk (CFAR) analysis can be used to estimate the likelihood that cash flows will fall or would have fallen to levels that trigger bond indenture covenants.
Resolution of Failed Banks
NERA economists use their expertise in the economics of banking and financial markets to evaluate the causes of bank failures and the consequences of different actions taken by regulatory authorities. We can also evaluate the macroeconomic consequences of policy choices taken to address financial distress for large and systemically important financial institutions.
IP Valuation
NERA economists thoroughly consider the relevant market and IP-specific information to make proper valuations of IP assets. In so doing, we formulate and test forward-looking assumptions about the prospective economic conditions of the IP assets at issue. Our experts apply rigorous economic analysis to a variety of IP-related issues including the monetary impact of theft of IP assets; the internal transfer price for the use of IP assets across divisions of a multinational corporation; the value of an IP asset or portfolio in connection with its sale or license; the decision to license IP, including a recommendation of an appropriate price and other terms; and the monetary impact of theft or loss of IP legal protection. Our economists have extensive experience valuing intangible assets including assignments relating to financial reporting and tax requirements, spinouts, asset sales, and calculating the internal transfer price for its use across divisions of a multinational corporation.
Forensic Accounting and Financial Analysis
NERA’s accounting experts are uniquely positioned to evaluate the economic substance behind reported financial results while being aware of the actual transactions that underlie the numbers. This knowledge has been used for analyzing the value of securities tied to lending, including reserves for losses on the balance sheet of the originators. It has also been used for examining allegations of accounting fraud and evaluating economically complex transitions or entities. We analyze the economics of mutual funds and data in cases of alleged mutual fund fraud and the effects of accounting assumptions and estimates.
Financial Asset and Business Valuation
NERA economists help clients establish fair and accurate valuations of businesses and IPOs. Business valuation depends on financial forecasting and analysis. To make sound forecasts, it is important to understand the dynamics of the marketplace. This is the hallmark of NERA’s approach, one that has been successfully used by business owners and attorneys in litigation, and investment bankers/venture capitalists interested in acquiring a real measure of business value.
Valuation of Structured Products and Derivative Closeouts
NERA experts consult on cases for derivative closeouts where the value of derivatives results is highly contested. NERA has assisted clients on closeouts that arise due to failure in meeting collateral calls and valued large derivative books that contained thousands of contracts. Our valuations of complex financial instruments use real options, probability-weighted and dynamic cash flow models, the stock and debt approach to real property appraisal, and event studies to measure lost profits. Our experience with a variety of financial instruments, including structured products, credit default swaps, and other complex derivatives, allows us to quickly assess the impact of market conditions on the value of the derivatives.
Valuation of Assets
NERA economists have considerable expertise in standard valuation methods such as discounted cash flow analysis, comparable company analysis, and precedent transactions. Our understanding of the economics of valuation is critical in cases where historical data and other valuation benchmarks are either unavailable or inadequate. We incorporate company-specific, market, and industry factors and consider not only the market for similar assets but also the relevant product and input markets. Our capabilities include enterprise valuation, valuation of thinly traded securities, intangible asset valuation, and mass tort liability valuation.