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Navigant valuation services disputes and litigation august 2015

  1. Valuation Services for Disputes and Litigation August 2015
  2. Table of Contents Section 1 Valuation Services Section 2 Why Navigant ? Section 3 Practice Leadership Appendix A Technical Capabilities
  3. Section 1 Valuation Services
  4. Whither Experts Which answer best describes an expert? 1. A person who will state whatever it takes to help a litigator win a case. 2. A person who is qualified as an expert by knowledge, skill, experience, training, or education. 3. A person who dresses well and speaks well and can spin facts and theories through deposition and trial. The correct answer is #2, taken from Rule 702 and essentially based on the so-called “Daubert trilogy.” • Daubert v. Merrell Dow Pharmaceuticals “Flexible reliability” • General Electric Co. v. Joiner The “abuse-of-discretion standard of review” • Kumho Tire Co. v. Carmichael A Trial Judge’s “gatekeeping” function can be applied to all expert testimony, not just scientific and medical. Litigators want to win cases, but must do so within the confines of this trilogy when selecting experts to provide testimony. Experts must be experts in a specific field or discipline. They should not merely be experts at being experts.
  5. Why do you need a valuation ? Start by asking the key scoping questions !  What is the valuation needed for ?  Why is a professional valuation requested ?  Required Valuation-Accounting & Taxation  Disputes & Litigation  Commercial Valuation  Who is the audience ?  What is the standard of value ?  What is really at stake ?  How should it be priced ?
  6. Expert Valuation This kind of valuation work is done in the context of a dispute or litigation.  The standard of value is generally Fair Market Value.  The audience is counsel, opposing counsel, the Court, and jurors.  It is more theoretical than commercial.  Generally Accepted Valuation Principles must be used:  Cost method  Market method  Income method  The point of view for the valuation is a market participant’s view, i.e. an objective third person viewpoint.
  7. Expert Valuation Examples  Business Valuation  Shareholder Oppression (Outside of Texas)  Business Interruption  Punitive Damages  Tax Treatment of Damages  Non-patent Intellectual Property  Patent Infringement  Ex Ante vs. Post Ante Damages Calculations  Royalties  Merger and Acquisition Disputes  Economic Analysis in Securities Cases
  8. Risks & Pricing Risks  Cash damages  Enforcement actions  Reputation risk Pricing  Variable - Time and Expenses
  9. Essential Success Factors  Credibility !  Broad and deep industry experience  Transaction credentials  Testimony skill and confidence  Expert report drafting history  Detailed documentation and support  Carefully selected and vetted market inputs  Ability to clearly articulate findings to any audience  Expert, clean model and exhibits design
  10. Section 2 Why Navigant ?
  11. Navigant Consulting, Inc. Business Description Navigant Consulting, Inc. is a specialized, independent advisory firm that supports companies, lenders, institutional investors, legal counsel, and government agencies. The company focuses on entities and industries facing the challenges of uncertainty, risk, distress and significant change, and on the issues driving these transformations. Ticker NCI (NYSE) 2014 Revenue $859.6 million Professionals 3,600+ Headquarters Chicago, IL Senior Management ■ Julie Howard, CEO and Chairman, Navigant ■ Cindy Baier, CFO and EVP ■ Richard D. Hitt, Managing Director, Head of Navigant’s Corporate Finance Practice Navigant Consulting, Inc. (“Navigant”) NCI’s 2,500+ professionals maintain a presence in 45 cities internationally throughout North America, Europe and Asia, including a significant concentration of resources in Chicago, Houston, London, New York, and Washington DC.
  12. Comprehensive Energy Complex Coverage  Commodity Hedge Funds  Energy Services  Energy Trading & Marketing  LNG  Oil and Gas - Upstream  Oil and Gas – Midstream  Power Generation, Transmission, & Distribution  Refined Products  Renewable Energy
  13. Comprehensive Valuation Capabilities We have valuation expertise across the range of structures. We commonly value:  Investment grade debt  High yield and distressed debt  Complex securities  Hybrid securities  Common and preferred equity  Options, warrants & other derivatives  Partnership interests  Real estate and other tangible assets  Exotic options  Commodities and futures contracts  Interest rate and currency swaps  Earnouts and other contingent claims  Power Purchase Agreements  PIPE’s  Take or Pay contracts  Restricted stock  Oil and gas royalties  Mining interests  VPP’s  Intellectual property  IPR&D  Trade names  Goodwill  Customer relationship intangibles  Loan portfolios  Insurance reserves  Economic loss damages/lost profits
  14. Our Strengths  Broad and deep expertise across the Energy Complex  We have consulting, banking, and corporate experience in diverse financial and commodity markets, in addition to valuation & financial reporting technical capabilities. Our experienced team includes MBAs, CPAs, CFAs, CBAs, ASAs, CAIAs, and MAI’s.  We are a one-stop shop, as we do complex commodity derivatives valuations alongside our business and corporate valuation work.  Collaborative process  While our opinions are independent, you are involved throughout our process, because you know your investments better than anyone. We want to understand your thinking, and we want you to understand ours.  Thoroughness and accuracy  We give you more than just the conclusions. We give you thoroughly supported, accurate valuation reports.  Integrity  We are only interested in getting to the right answer, employing generally accepted valuation principles.  “Trusted Advisor” to our clients  Our clients view us as business partners, working together to establish best practices in valuation and transaction work as competitive advantages for their firms. What makes Navigant unique?
  15. Accepted in the Marketplace  Our work has supported KPMG, PwC, Deloitte, E&Y, BDO, GT, and other audit firms’ technical & audit staffs, undergoing detailed review of our fair value analyses for financial reporting and tax purposes.  Our work has been reviewed and accepted by the SEC in numerous filings.  We have extensive experience defending our valuations before the IRS (including Tax Court) and other tax and regulatory bodies.  Our senior professionals have performed technical reviews during their tenure at the major accounting firms. We maintain continuing professional relationships with current reviewers at these firms.  Our methodologies and findings have been presented to, and accepted by numerous rating agencies, qualified institutional buyers and certified investors.  Our professionals have published and spoken extensively on valuation topics as they pertain to the investment community.
  16. Trusted Advisor Service A combination of….. … resulting in a “Trusted Advisor” relationship creating valuation as a competitive advantage. Flexibility Collaboration Accuracy Thoroughness Timeliness Integrity Expertise
  17. “Excellent communication” “Very responsive from a process and analysis standpoint” “Exceeds expectations in response time “ “Investors have reached out to Navigant on methods and assumptions and have only provided positive feedback” “Meets all schedules and deadlines” “Provides creative ideas and suggestions” References available upon request What our clients say about us….
  18. Navigant vs. Big 4  We have a diverse skill set; not just CPAs,  We have corporate industry experience, they do not,  Valuation is based on economics and finance, not on accounting, and  We are not limited by rules-based thinking and checklists.
  19. Navigant vs. Wall Street  We do not have trading and marketing desks, so we can be more objective,  We understand regulatory and statutory valuation, bankers often do not, and  We get all of the accounting and tax rules that are unique to the Energy Complex.
  20. Navigant vs. Boutique Firms  Our balance sheet and brand stand behind our work,  We can deploy a wide variety of resources globally,  We do not have to outsource or sub-contract anything, we are a one-stop shop, and  Small firms cannot be counted on to be there with you through all of your regulatory challenges.
  21. Section 3 Practice Leadership
  22. Resumes Richard D. Hitt, Jr. Managing Director National Practice Leader Navigant Consulting 30 South Wacker Drive Suite 3100 Chicago, IL 60606 Cell: 312.953.7197 Tel: 312.583.2621 Professional History  Navigant Consulting, Inc.  BearingPoint, Inc.  KPMG, LLP Education  M.S.A., Eastern Michigan University  B.S., University of Michigan Licenses & Certifications  Certified Public Accountant Richard Hitt is a Managing Director and the Practice Leader for the Valuation & Financial Risk Management practice of Navigant Consulting, Inc., based out of the Chicago office. He has more than 25 years of valuation and financial advisory experience working with financial institutions and energy companies of all sizes. In his current role at Navigant Consulting, Mr. Hitt oversees engagements governing acquisitions and sales of banks and thrifts and is a leader in the firm’s efforts to develop and employ effective valuation and due diligence techniques. His clients include some of the largest and best known financial service and energy corporations in America, including Deutsche Bank, Bank of America, Bank of Montreal, KeyCorp, Charles Schwab, First Republic Bank, E*Trade Financial Corp., NRG, LS Power, Primary Energy and Aquila. Formerly a Managing Director of BearingPoint Inc’s Valuation and Financial Services Advisory practice, Rick led the development of a multi-faceted practice that focused on banks, thrifts, specialty finance and energy companies. His experience includes financial advisory to community and regional banks, including due diligence, fairness opinions, shareholder value analyses, merger and acquisition transactions as well as capital raising and investment strategies. Prior to BearingPoint, Mr. Hitt was a partner in KPMG’s Valuation Services Practice. Recent assignments Mr. Hitt has directed include: • Valued individually all the domestic and international electric generating facilities of a $5 billion utility for asset-backed funding purposes. The project included separate valuations of the power contracts and merchant plants. • Valued the domestic and international electric generating, electric and gas transmission and distribution assets of a $4 billion utility for asset-backed funding purposes. The project also included valuing complex electricity and natural gas derivatives. • Performed financial analyses for the domestic operations of a $10 billion utility for debt restructuring purposes. • Rendered a fairness opinion to a Midwest life company as part of establishing a mutual holding company. • Rendered a fairness opinion to a retail self insurance fund related to an investment in a workers compensation insurance company. • Provided SFAS 141 and 142 valuation assistance in the merger of two $150 billion US banks.
  23. Thomas J. McNulty Director Navigant Consulting 909 Fannin St. Suite 1900 Houston, TX 7010 Tel: 713.646.5078 Cell: 832.472.3717 Professional History  Navigant Consulting, Inc.  Sirius Solutions LLP  Plains All American  Duke Energy  Enron International  US Foreign Service  Brown Brothers Harriman Education  M.B.A. (Accounting & Finance), Kellogg, Northwestern University  B.A. (History), Yale University Tom McNulty is a Director in the Valuation & Financial Risk Management practice of Navigant Consulting, Inc. His specialties are transaction and commercial analytics, valuation, and risk management. Specifically, his practice offers clients a unique combination of strategic, financial, and transactional advisory services. Mr. McNulty is based out of the Houston office, and he has more than 20 years of financial advisory and related experience work. As a consultant, Mr. McNulty has advised clients drawing on his valuation, transactions, risk management, treasury and international credentials. Specifically, he has assisted with the valuation of securities, business units, acquisition targets, derivatives, and equity incentive plans. In industry, and as an advisor, he has worked on more than $38 billion in MD&A deals and has valued more than $8.5 billion notional in futures, options, and other derivatives. In his current role at Navigant Consulting, Mr. McNulty directs engagements governing acquisitions and divestitures throughout the energy complex, including upstream oil & gas, midstream, merchant power, renewable energy, energy services, trading and marketing, as well as LNG. He also performs valuation work for clients with complex equity, fixed income, and commodity derivative instruments. Recent assignments Mr. McNulty has led include: • Provided ASC 815 assistance to several energy companies related to their derivatives portfolios. • Rendered a comfort opinion to a energy hedge offering a new midstream oil & gas fund. • Rendered an opinion to an oilfield services company for a related party transaction. • Directed ASC 805 project for the reverse merger of two private drilling companies. • Provided ASC 718 valuation assistance to a publicly traded oilfield services company for its restricted stock units and stock options. • Delivered ASC 718 valuation assistance to a privately held upstream oil & gas company for its equity incentive plan. • Led the valuation work on the GP interest in a privately-held midstream company for a large litigation engagement. Resumes
  24. Tom Houlihan Director Navigant Consulting 1180 Peachtree Street N.E. Suite 1900 Atlanta, GA 30309 Tel: 404.602.5038 Cell: 404.849.1243 Professional History  Navigant Consulting, Inc.  Intercontinental Exchange  Mirant Corporation  JC Bradford & Co Associations and Licenses  FINRA Series 7 & 63  Candidate Member, American Society of Appraisers Education  MBA, Finance, Vanderbilt  BSBA Finance, Creighton Thomas Houlihan is a Director in the Valuation & Financial Risk Management practice of Navigant Consulting, Inc. Mr. Houlihan’s principal focus is on valuation and advisory engagements related to the energy sector. In this role, has provided clients with valuation consulting services for purposes including transaction due diligence, fairness opinions, capital raising & investment strategy as well as litigation, tax and regulatory purposes. With more than 16 years of valuation and financial advisory experience, Tom has provided valuation and transaction assistance for client engagements involving some of the world’s largest energy companies and utilities, as well as mid‐sized companies, energy start‐ups and private investment funds. Prior to joining Navigant Consulting, Tom held various roles in investment banking and corporate finance, including senior positions in the debt capital markets division of JC Bradford & Co (now UBS Capital Markets) and more recently in corporate development and asset management positions with Mirant Corp (Southern Energy) and as Director of Finance and Strategy for Intercontinental Exchange (ICE). Recent assignments Mr. Houlihan has directed include: • Fair Market Value of multiple nuclear power plants - Retained by a large investor owned utility to assist with evaluating options with respect to the early buyout or termination of lease financings secured by the company’s interest in several nuclear power plants. • Valuation of a municipal waste-to-energy generation facilities to assist a client with evaluating lease repurchase and financing options; • Acted as primary valuation advisor to support a client’s effort to finance the $210 million purchase of 680 MW North American peaking facility. NCI provided the client with additional valuation services to support the company with allocation of purchase price for financial reporting. • Performed the valuation of North American gas distribution system serving approximately 426 active meters through approximately 11 miles of gas distribution mains. NCI provided an estimate of the fair market value of the business to assist the client’s effort to secure just compensation for the assets, which were taken through condemnation proceedings. • Retained by a major investment bank to provide an estimate of the prospective fair market value of a of 1,161MW CCGT. The estimate of value was necessary for financial reporting purposes, including disclosures related to residual value guarantees stipulated in lease finance transactions for the plant. Resumes
  25. Neeli Souli Kohan Associate Director Navigant Consulting 90 Park Avenue, 10th Floor New York, NY 10016 Tel: 646-227-4654 Cell: 646-232-8855 Professional History  Navigant Consulting, Inc.  Deloitte Financial Advisory Services LLP  Overseas Shipholding Group Education  M.B.A., Finance, Pace University  B.S., Accounting, Yeshiva University Accreditation  Chartered Financial Analyst (CFA), CFA Institute  Certified Public Accountant (CPA), NY and NJ  Candidate, ASA Neeli Kohan is an Associate Director in the Valuation & Financial Risk Management practice of Navigant Consulting, Inc. Ms. Kohan is based out of the New York office. Ms. Kohan has more than 16 years of experience in the valuation of public and private businesses, securities, and intangible/tangible assets. She has performed valuations for purposes of financial reporting (including Business Combinations, Goodwill and Long Lived Asset Impairment Testing for US GAAP and IFRS), Federal tax, project financing, sale/leaseback transactions, M&A due diligence, and management information purposes. Industries served include power generation, gas, electric, water and wastewater utilities, alternative energy providers, private equity, media and entertainment, shipping and transportation. Ms. Kohan is a Certified Public Accountant, a Chartered Financial Analyst and a candidate of the American Society of Appraisers. She has a B.S. from Yeshiva University in Accounting and an M.B.A. from Pace University in Finance. Prior to joining Navigant Consulting, Ms. Kohan was with the Valuation practice of Deloitte Financial Advisory Services, LLP. Resumes
  26. Appendix A Technical Capabilities
  27. Technical Upstream Services Opportunity Screening and Evaluation Strategic framework and prospect screening, detailed analysis, and project execution planning. Economic and Capital Program Valuation Reserves valuation, economic assessments, post-installation appraisals, risk analysis, and stochastic modeling. Asset Exploration Exploratory drilling, regulatory planning/administration, and environmental agencies reporting. Oil & Gas Asset Evaluation & Exploitation Drilling, completion, testing, production initiation, operations execution, drill- bit to sales project execution, regulatory planning, and administration. Capital Project Design & Implementation Infrastructure and production facilities development, planning and scheduling, full field development, portfolio management, basic engineering design, FEED, construction, procurement, PMO, engineering data management, wastes management, and water management.
  28. Technical Upstream Services cont’d Operations Management Artificial lift methods, facility assessments, completion techniques and design, subsurface assessment and configuration, cost and expense management/efficiency, well integrity, real-time operations optimization, and integrated operations. Reserve & Reservoir Engineering Reserves re-assessment, recovery enhancement & production optimization, reservoir management, and infill programs. Asset Management Operating asset rationalization, asset integrity management, and turnaround optimisation. Data Management & Innovation Subsurface data management & data flow optimization, real-time data management, and digital oilfield rationalization and optimization.
  29. Terry Manning Liya Dossybieva is an upstream oil & gas professional with over 14 years of international experience in hydrocarbons production operations, business strategy & transformation, investment & divestment projects evaluations, business optimisation and continuous improvement. She is an expert in optimisation of upstream operations, operational excellence, and integrated operations models. Liya develops and leads delivery of strategic and business transformation initiatives and programmes with the view to optimise production assets’ efficiency, reduce operational costs, increase production levels, and improve recovery. Liya will deliver data analysis and hypothesis creation for Clients. Liya Dossybieva Terry Manning, a Director in Navigant’s global Oil & Gas practice based in Houston, is an upstream oil and gas professional with more than 35 years of practical execution and asset management experience. He is an experienced practitioner in the areas of production optimization, streamlining operations, reservoir management and portfolio rationalization, including well completions, reserve analysis and managing oil and gas assets to improve profitability. Terry has relevant and specific work experience in many of the producing basins in the United States and in Canada. He is a strong advocate that drilling and completion program optimization originates from repeatable processes for effective and efficient development planning and real-time implementation appraisal. Terry’s Houston location provides direct access for North American client personnel. Mike Dyson is a Director in Navigant’s global Oil & Gas practice. He brings 30+ years of experience in the upstream oil and gas business, having worked at Shell and BG Group around the world. His core expertise is in well and production operations, capital projects, supply chain strategies and new technology development and implementation. He is focused on providing consulting advice to oil & gas E&P companies looking to improve their business performance, and is a strong advocate of holistic and sustainable improvement by tackling all elements of transformation. These include rigorous operations planning and execution, collaborative working across the supply chain, application of new technology, teamwork, communications and personal leadership. Mike Dyson Our Upstream Professionals