4. Madison Street Capital Valuation Practice
Madison Street Capital specializes in the independent valuation of complex
and hard-to-value investments. Our team of experts provide Portfolio Valuation
Services across a wide array of asset classes spanning multiple structures,
geographic locations and liquidity levels (primarily considered Level III). Our
clients are generally focused in the financial services sector, including the
following industry sub-groups:
– Asset Management
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Hedge Funds
Private Equity
Venture Capital
Registered Investment Companies
Pensions
Foundations and Endowments
Banking
Insurance
Specialty Finance
Real Estate
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5. Asset Management Industry Focus
Madison Street Capital is a specialist firm when it comes to investment banking and
valuation services for Asset Managers. The firm has a specialized Asset Management
Industry Focus group that provides financial advisory services in the following 4
categories:
M&A ADVISORY
• Sell-side and Buy-side
Advisory
• Divestitures and Strategic
Alliances
• Capital Introductions
• Due Diligence and
Transactional Support
• Seeding Transactions
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VALUATION
•Portfolio Valuations
(complex, hard -to-value
securities)
•Monthly, Quarterly, and
Annual Pricing Reports
•Valuation of
Advisor/Management
Company
•Financial Opinions (Fairness,
Solvency, and Other
Transaction-based)
RESTRUCTURING
FINANCIAL SPONSOR
COVERAGE
• Restructuring (Wind
Downs; Side Pockets; Fund
Transfers)
•Deal-flow generation
through:
• Recapitalization (Loan
Workouts; Refinancing)
-Private Placements
-Debt Financings
-Structured Debt/Equity
• Asset Disposal and
Liquidations
• Distressed Debt
• Management Company
Reorganizations
•Secondary Market
Transactions
• Access to Private/Public
Company Portfolios and
Transactions
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7. Portfolio Valuation Services
Transparent Valuation in a Complex World
The last few years have demonstrated the severe risks caused by inadequate
disclosure regarding complex and hard-to-value investments. In a world that
favors liquidity and transparency, the need for independent and supportable
portfolio valuations has never been greater. Given the material impact that the
measurement of certain riskier or private investments can have on the Net Asset
Value, it is instrumental to have a professional firm like Madison Street Capital
that has the technical and practical experience to assist in providing correct and
accurate fair values.
With the convergence and adoption of tighter global financial accounting
standards, firms that hold Level II and III assets are increasingly being demanded
by auditors (and investors) to support the validity and integrity of their
methodologies and marks. That support often is best provided by an outside firm
that has deep expertise with the types of investments and the unique risks that
each structure presents.
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8. Portfolio Valuation Services (Cont’d)
Madison Street Capital provides a full range of valuation advisory services to asset
management firms around the world by combining technical expertise with best practice
modeling techniques. The following factors differentiate us from our competitors:
Independence and Objectivity
Madison is an independent boutique firm that specializes in the asset management industry and does not encounter the
conflicts of interest that other multi-disciplinary investment banks and valuation firms face. Further, our process is
predicated on objectivity and transparency – we work in a professional, unbiased manner with our clients to achieve
accurate and supportable results.
Technical Knowledge
Our depth of knowledge in valuing the universe of hard-to-value and complex investments is unparalleled. Our teams
keep current with industry best standards, whether it be regulatory or accounting driven. Further, we utilize the most
cutting-edge technology in terms of valuation models and draw-up on the most relevant 3rd party data resources.
Industry Experience
We are known for our asset management industry experience and have worked with all varieties of asset managers on
many different types of projects. There are not many scenarios where we do not have the experience or know-how to
resolve an issue, in the rare instance that we don’t, we have access to the right resources to find the answer.
Seasoned Professionals
Madison’s team are comprised of valuation experts who not only have the necessary accreditations and deep product
knowledge, but also are very experienced working with clients and their auditors (and other external parties) to go
through the valuation process in a seamless and highly efficient manner.
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9. Portfolio Valuation Services (Cont’d)
Madison Street Capital’s reputation as a premier service provider to Asset Managers is
built upon years of extensive industry knowledge combined with highest levels quality
and service. Our professionals consistently exceed the expectations of our clients.
Our delivery starts with identifying our client’s needs, creating a customized work plan
and then executing in a highly sophisticated and responsive manner.
MSC combines technical expertise with best practice modeling techniques to perform
complex Portfolio Valuation Services. The MSC team:
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Understands the need for independence in these times of heightened scrutiny.
Our practice is built on a commitment to eliminating conflicts of interest and
ensuring our analyses are objective and unbiased;
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Provides clear, concise, and transparent analyses and reports which are ASC
820/IAS 39 compliant and have been reviewed and accepted by the “Big 4” audit
firms;
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Employs sophisticated methodology when it comes to pricing and uses the most
current mark-to-market pricing technology available.
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11. Complex Valuation Methodology
MSC employs fundamental valuation approaches based upon the structure and
risks associated with a particular security. Methodologies used in the past have
included:
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Monte Carlo Simulation
Binomial trees
Trinomial trees
Scenario analysis
Credit derivative models
Standard mortgage models assuming prepayment and cumulative losses
Decision tree analysis
Exotic derivative cash-flow models
Comparable security analysis
Precedent transaction models
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12. Portfolio Valuation Report Formats
MSC provides fair values of complex and hard-to-value investments for clients
consistently and reliably. Marks and reports may be provided daily, monthly,
quarterly, semi-annually, annually, or on an as needed basis.
The following are types of deliverables that MSC can provide:
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Full Report
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Summary Report
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Robust report detailing current market environment for the Investments; Market and
company specific factors affecting the Investments; Detailed analyses of assumptions
and calculations used to arrive at the valuation opinion.
High-level summarization of the Full Report deliverable that is more compact but covers
the main Quantitative points at a lower cost.
Marks Only
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Direct pricing of securities with no accompanying valuation schedules or verbiage.
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13. On-Going Experience/Client Communication
Madison Street Capital provides on-going valuation services to several of its clients,
especially as it pertains to the periodic updating of fair value estimates.
MSC is proactive with its clients to keep abreast of current developments. Although our
approach takes into consideration changes to internal and external factors, we understand
the need for consistency and our senior reviewers ensure that there are no significant
fluctuations in the value (unless there are extraordinary causes that would warrant it).
Upon completion of initial due diligence and conducting its independent valuation analyses, a
draft summary of the valuation is provided to the client. This allows the client to provide initial
feedback on the assumptions and preliminary conclusions, prior to sending the final report.
The nature of feedback is typically potential factual inconsistencies versus subjective
differences of opinion, which is in adherence with our independence policy.
Our findings and analyses are well-documented in a written report with our assumptions and
valuation methodologies clearly explained and supported. Additionally, our detailed reports
and documentation increase management efficiencies throughout the audit and financial
reporting processes.
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14. On-Going Experience/Client Communication (cont’d)
As a firm policy, the team assigned on the engagement from Madison Street Capital is
always made available to the client, regardless of level of seniority. We believe that this is an
important component of the on-going communication process and helps identify potential
issues well in advance.
Another important component to our service offering is that we try to take full advantage of all
the resources that are made available. For example, as an investment bank, we are able to
draw upon certain capital market data that can be useful in supporting our valuations of hardto-value and complex securities where there is limited public data.
Finally, our methodology is predicated on transparency and the ability to re-perform it. We
believe that this an important attribute to the audit process and enables our clients’ auditors
to test our work product in the most efficient manner. Our senior professionals have dealt
with Big 4 auditors (and other firms) in the past on numerous occasions and are familiar with
the different review processes that each firm has. Given the transparent nature of our work,
this process usually goes smoothly without any significant issues.
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16. MSC Valuation Expertise
MSC has extensive experience performing valuations of the following
Private/Direct Equity and Debt Investments:
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Common and Preferred Equity investments in Private Companies
Thinly Traded Public Equity or Debt
Equity Investments across a wide array of industries
Emerging market private equity and debt
PIPE’s
Defaulted and Distressed private debt
Limited Partnership Units
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17. MSC Valuation Expertise (Cont’d)
MSC has extensive experience performing valuations of the following Fixed
Income Instruments and Loan Portfolios:
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Auction Rate Securities - Student Loan, Municipal, Closed-end, Insurance
trust, contingent capital, CDO, CLN, CDPC, etc.
Cash and Synthetic CDO & CDO2’s
Credit Default Swaps - Single-Name, Standard Index, Bespoke
Trust Preferred Securities
Credit Linked Notes
Agency Notes & Preferred
RMBS – Agency, Alt-a, Subprime, CES, HELOC, etc.
CMBS
Insurance-linked Securities
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18. MSC Valuation Expertise (Cont’d)
MSC has extensive experience performing valuations of the following Derivative
Securities:
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Life Settlements and Premium Finance
Real estate loans (and REO)
2nd lien /Junior /unsecured/subordinated loans
Prime and sub-prime consumer debt such as auto receivables
Legal lines/Law Firm loans
Film Financing Loans
Royalty Streams
Trade Finance
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19. MSC Valuation Expertise (Cont’d)
MSC has extensive experience performing valuations of the following Derivative
Securities:
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Credit default swaps
Certain convertible securities
Energy derivatives (exotic swap/forward/option structures)
Interest rate derivatives
Currency derivatives
Exotic OTC options
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23. About Madison Street Capital
MADISON STREET CAPITAL is an independent investment
banking and valuation firm committed to the highest standards of
integrity and service in providing financial advisory, financing
services, valuation services, and restructuring services to public
and private firms. Madison Street Capital has focused expertise
in partnering with middle-market firms to successfully navigate
complex transactions and successfully assist clients in optimizing
their company's potential. Madison Street Capital's experienced
professionals serve clients across the globe from offices in North
America, Asia, and Africa. Securities offered through MSC-BD,
LLC, member of FINRA/ SIPC.
We combine analytical precision with in-depth industry knowledge
to address even the most sophisticated valuation challenges Our
approach
exceeds
regulatory compliance requirements
concerning corporate valuation, financial reporting, tax, and
litigation support.
Madison’s valuations are objective,
independent, defensible, and thoroughly documented in order to
meet the heightened requirements of regulatory agencies,
auditors, and legal bodies.
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24. For more information please contact :
Karl D’Cunha, CA
Senior Managing Director
105 W. Madison Street, Suite 1200
Chicago, IL, 60602
(312) 529-7000
kdcunha@madisonstreetcapital.com
