Deal Structuring

In large transformational transactions, most of Devon’s clients use a large Investment Bank to advise on financial structuring and execution as well as to provide a fairness opinion for the Board. Devon always works for corporate management, provides no fairness opinions, and has no financial execution capability. Nevertheless, our clients have often benefited from a second opinion on the value accretion or dilution of the financing strategies proposed by our clients’ banks.

In one case, our models suggested a $5 per share accretion from an EPS dilutive equity offering to finance a transaction while the investment bank models predicted a dilution of almost equal size. The transaction created the predicted accretion.

In another recent case, Devon recommended that a client absorb a 20% prepayment penalty to remove legacy debt because the modeled value accretion from a negotiated acquisition justified the increased transaction cost with substantial cushion. Although the initial reaction of investors was negative, the deal proved highly accretive and was instrumental in setting up the next acquisition which was even more accretive to value.