Mergers, Spin-Offs, and Divestitures

There are a number of types of transactions in which the board of directors needs an understanding of value to fulfill its fiduciary duty or in which companies need an understanding of value to resolve a disagreement. The consulting and valuation services provided by Teknos help management and a Board of Directors deal specifically with these critical governance issues related to mergers and acquisitions, spin-offs, or divestitures. The consulting and valuation services provided by Teknos help management and a Board of Directors deal specifically with these critical governance issues related to mergers and acquisitions, spin-offs, or divestitures.

Private-to-Private Merger of Equals

In technology markets there are many private-to-private transactions, usually structured as a “merger of equals”, which are completed without the involvement of an investment bank.  In such a deal, management of the two companies are able to resolve most issues (e.g. post-transaction management structure, combined product line, etc.) without an outside advisor, but cannot agree on relative valuation.

In such cases, Teknos can prepare separate analyses of the two companies, allow each company to consider its own valuation for a time, and then swap the two reports.  The result is not always a formulaic division of equity ownership in line with the analysis, but the process can substantially help facilitate an agreement – investment bank quality analysis without an investment bank size fee.

See our white paper on Merger of Two Private Companies Enabled by Independent Valuations.

Corporate Spin-Offs

A company considering a sale, spin-off, or other divestiture of a part of its business must consider whether the value it is receiving is adequate and fair and may want some assistance in structuring the transaction.  Teknos has provided advice and valuation support for dozens of such cases.

In one notable example, we assigned appropriate values to the two parts of a business, helped split the liquidation preferences, and repriced employee stock options.  Within the next year, the two businesses sold to separate buyers for a total of more than $140 million—after previously getting no offers for more than the $25 million invested in the combined company.

See our white paper on Valuation for Corporate Spin-Offs.