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409A valuation for independent advisory firm

CLIENT

A leading US-based, independent valuation and advisory firm.

OPPORTUNITY

SG Analytics assisted the client in determining the base price for stock options that were to be issued to the top management of a company involved in developing novel therapeutic solutions for the diaphragm muscle. Different classes of shares had given rise to complication on the allocation of value to each class of shares making it a complicated assignment.

SOLUTION

SG Analytics understood the client’s requirement in detail and implemented the following solution:
  • Review all relevant documents as part of the due diligence process, including capitalization table and latest article of incorporation.
  • Analyze the business model, management changes, latest products, and significant changes from previous valuations along with detailed industry research on growth trends and demand and supply dynamics.
  • Evaluate the equity of the business assessing the appropriateness and applicability of different valuation approaches, including the traditional cost, income, and market approaches.
  • Analyze the stock options agreement to comprehend the rights and preferences pertaining to the issue of equity security and the outcome of each possible exit event.
  • Determine the relevant inputs for the option valuation methods from industry databases and client discussions.
  • Leverage the Black Scholes option pricing model, allocating the total value between various classes to determine the stock options value.
12 days
Round-the-clock support.
50%
Faster than usual process.
10+
Referrals due to high client satisfaction.

Value Delivered

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1
SG Analytics built an audit free high-quality valuation opinion that was independent, credible, and cost-effective.
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2
Our team also provided a scenario analyses to assist the management in understanding the impact of each potential exit on the value of the stock options.
 

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