4.
Oversight of Valuation Advisor
– Required Analysis –
The DOL
asked the Trustee to document
the assumptions used in the
projections for the ESOP and
identify the individuals who
prepare the projections including
any potential conflicts of interest.
5.
Financial Statements –
The
Trustee must request five years
of audited financial statements
or the available audited financial
statements be provided to the
Trustee and financial advisor.
If audited financial statements
are unavailable, the Trustee
must document why the
unaudited financial statements
are suitable.
6.
Fiduciary Review Process
– General –
The Trustee must
determine the reasonableness
of the financial statements
provided by the ESOP sponsor as
it pertains to “the purchase
or sale of employer securities
that are not publicly-traded.”
Also, the Trustee must assess the
reasonableness of the
projections, if it is not
documented in the valuation
advisor’s report. Lastly, any
information provided by the ESOP
sponsor to the valuation advisor
must be assessed by the Trustee
to determine whether it is
current, complete and accurate.
7.
Fiduciary Review Process –
Documentation of Valuation
Analysis –
The Trustee must
document its conclusions
regarding various parts of the
report including:
a. Marketability and minority
discounts
b. Control premiums
c. The reasonableness of the
company’s projections
d. Value drivers of the company
e. Discount rate(s) applied
f. Financial statement
adjustments
g. Relevant economic and
industry narrative
h. Reliability and timeliness of
historical financial data
considered
i. Material assumptions
j. Documenting why the
averages, median or other
multiples are selected in the
market-based approach
k. How corporate debt is
considered
l. Determining if the
methodologies employed
were standard and
accepted methodologies
m. ESOP sponsor’s ability to
service any debt or liabilities
to be taken on in connection
with the proposed transaction
n. Foreseeable risks of the
proposed transaction
o. Disclosure of any other
material considerations
or variables that could
significantly affect the price
of the employer securities
4
| Valuation Vantage
Fall-Winter 2014
“
Implications of GreatBanc Trust’s Settlement...
”
continued
continued
