Solvency Opinions

Q: What is a solvency opinion?

A solvency opinion is an independent analytical assessment of a company’s financial condition following a leveraged transaction or significant distribution. It evaluates whether the company meets applicable solvency tests. Including balance sheet solvency, adequate capital, and the ability to pay debts as they come due.

Q: When is a solvency opinion required?

Solvency opinions are typically required in connection with leveraged buyouts, dividend recapitalizations, management buyouts, significant distributions to shareholders, and other transactions that materially alter a company’s capital structure or debt obligations.

Q: Who engages Houlihan Capital for a solvency opinion?

Engagements are typically initiated by the company’s board, the financing parties, or legal counsel. In some cases the lender requires a solvency opinion as a condition of closing.

Q: What solvency tests do you apply?

We apply the three standard solvency tests: balance sheet solvency (assets exceed liabilities), adequate capital (sufficient capital to conduct business), and cash flow solvency (ability to pay debts as they come due). The specific tests applied depend on the transaction structure and applicable legal requirements.

Q: How quickly can a solvency opinion be delivered?

Timeline depends on transaction complexity and information availability. We are structured to move at transaction speed. We recommend engaging as early as possible to allow adequate time for analysis and documentation.

Q: What information do you need to deliver a solvency opinion?

Financial statements, financial projections, transaction documents, and information about the post-transaction capital structure form the foundation. We will outline specific requirements at the outset of each engagement.

Q: How does a solvency opinion address fraudulent conveyance risk?

A solvency opinion provides independent documentation that the company met applicable solvency tests at the time of the transaction, which is a key element in addressing potential fraudulent conveyance claims in connection with leveraged transactions and distributions.

Independent Solvency Analysis Supporting Leveraged Transactions, Recapitalizations, and Distributions

Solvency opinions provide independent analytical support for transactions that alter a company’s capital structure, debt obligations, or distributions to shareholders. Houlihan Capital delivers objective solvency analyses grounded in rigorous financial modeling and institutional-grade documentation, supporting boards, lenders, and their advisors in evaluating whether the transaction meets applicable solvency standards.

Our opinions are structured from the outset to support legal and board review, addressing the key solvency tests required in connection with leveraged transactions.

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What We Do

Solvency Opinion Services

Leveraged Buyouts

Independent solvency analysis for LBO transactions, supporting the board’s assessment of the company’s ability to meet its financial obligations post-transaction

Dividend Recapitalizations

Solvency opinions for dividend recapitalizations, evaluating the company’s financial condition following the distribution and addressing fraudulent conveyance risk

Management Buyouts

Independent analytical support for MBO transactions where the company is taking on significant new debt to fund the acquisition

Mergers & Acquisitions

Solvency analysis supporting M&A transactions involving significant leverage, addressing the combined entity’s ability to meet its obligations post-close

Spinoffs & Divestitures

Solvency opinions for spinoff and divestiture transactions, evaluating both the parent and divested entity’s financial condition post-transaction

Distributions to Shareholders

Independent solvency analysis supporting significant distributions to shareholders, addressing applicable legal standards and financial condition requirements

Why Houlihan Capital

Built for Boards, Lenders, and the Businesses They Finance

Houlihan Capital combines valuation depth with transaction experience to deliver opinions that meet governance requirements without slowing deal execution.

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Independence & Objectivity

Houlihan Capital is an employee-owned valuation and investment banking firm. We do not manage assets, provide wealth advisory services, or distribute proprietary investment products, so our analysis is not shaped by products we need to place or positions we need to protect. We provide objective, independent solvency analysis on every engagement.

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Institutional-Grade Methodology

Our solvency analyses apply consistent, well-documented testing methodologies structured to support board review, lender requirements, and legal scrutiny.

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Responsive Delivery

We understand the time sensitivity of leveraged transactions. Our team is structured to move at deal speed while maintaining the analytical rigor your lenders and counsel require.

Common Questions

Questions Boards, Lenders, and Advisors Ask Us

What is a solvency opinion?

When is a solvency opinion required?

Who engages Houlihan Capital for a solvency opinion?

What solvency tests do you apply?

How quickly can a solvency opinion be delivered?

What information do you need to deliver a solvency opinion?

How does a solvency opinion address fraudulent conveyance risk?

Strategic Insights

Guidance for Boards, Lenders, and Transaction Professionals

The Critical Role of Solvency Opinions in Dividend Recaps

An analysis of how solvency opinions support risk mitigation in leveraged transactions, with a focus on dividend recapitalizations and fraudulent conveyance considerations.

Read the Article

Solvency Compendium

Comprehensive reference for legal counsel and transaction professionals covering case law, statutory tests, and terminology relevant to solvency determinations.

Access the Compendium

Valuation Services Overview

A comprehensive overview of Houlihan Capital’s valuation and transaction opinion services across financial reporting, tax, and transaction advisory.

Download Overview

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