4275. Disclosure — formal valuations

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    1. A professional opinion that is a formal valuation prepared by a Dealer Member must disclose the following information:

      1. the identity and credentials of the Dealer Member, including:

        1. the general experience of the Dealer Member in valuing other businesses in the same or similar industries as the business or issuer in question or similar transactions to the subject transaction,

        2. the Dealer Member’s understanding of the specific marketable securities involved in the subject transaction, and

        3. the internal procedures followed by the Dealer Member to ensure the quality of the professional opinion,

      2. the date the valuer was first contacted in respect of the subject transaction and the date that the valuer was retained,
      3. the financial terms of the valuer's retainer,
      4. a description of any past, present or anticipated relationship between the valuer and any interested party or the issuer which may be relevant to the valuer's independence for purposes of relevant securities laws,
      5. the subject matter of the formal valuation,
      6. the effective date of the formal valuation,
      7. a description of any specific adjustments that have been made in the valuer's conclusions by reason of an event or occurrence after the effective date,
      8. the scope and purpose of the formal valuation, including the following statement:
        1. "This formal valuation has been prepared in accordance with the disclosure standards for formal valuations and fairness opinions of the Investment Industry Regulatory Organization of Canada (IIROC) but IIROC has not been involved in the preparation or review of this formal valuation",
      9. a description of the scope of the review conducted by the valuer, including a summary of the type of information reviewed and relied upon (such as the documents reviewed, individuals interviewed, facilities visited, other expert reports considered and management representations concerning information requested and furnished to the valuer),
      10. a description of any limitation on the scope of review and the implications of such limitation on the valuer's conclusions,
      11. a description of the business, assets or securities being valued sufficient to allow the reader to understand the valuation rationale and approach and the various factors influencing value that were considered,
      12. definitions of the terms of value used in the formal valuation including but not limited to "fair market value", "market value" and "cash equivalent value”,
      13. the valuation approach and methodologies considered, including:
        1. the rationale for valuing the business as a going concern or on a liquidation basis,
        2. the reasons for selecting a particular valuation methodology, and
        3. a summary of the key factors considered in selecting the valuation approach and methodologies considered,
      14. the key assumptions made by the valuer,
      15. any distinctive material value that the valuer has determined might accrue to an interested party, whether this value is included in the value or range of values arrived at for the subject matter of the formal valuation and the reasons for its inclusion or exclusion,
      16. the following discussions or explanations:
        1. a discussion of any prior bona fide offers or prior valuations or other material expert reports considered by the valuer pertaining to the subject matter of the transaction, or
        2. if the formal valuation differs materially from any such prior valuation, an explanation of the material differences where reasonably practicable to do so based on the information contained in the prior valuation or, if it is not reasonably practicable to do so, the reasons why it is not reasonably practicable to do so, 
      17. and
      18. the valuation conclusions reached and any qualifications or limitations to which such conclusions are subject.
    2. A professional opinion that is a formal valuation prepared by a Dealer Member in connection with a subject transaction must disclose the following:
      1. Annual financial information
      2. Unless otherwise disclosed through the Canadian continuous disclosure obligations of the issuer or in a disclosure document published in connection with the transaction to which the professional opinion applies:
        1. The professional opinion must disclose a summary of selected material financial information derived from the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity for the most recently completed fiscal year as well as from the statement of financial position, statement of profit or loss and other comprehensive income and statement of changes in financial position for the immediately preceding fiscal year.
      3. Interim financial information
      4. Unless otherwise disclosed through the Canadian continuous disclosure obligations of the issuer or in a disclosure document published in connection with the transaction to which the professional opinion applies:
        1. The professional opinion must disclose a summary of selected material financial information derived from the most recent interim statement of financial position (if any), statement of profit or loss and other comprehensive income and statement of changes in equity for the current fiscal year and the comparable statements for the same interim period of the immediately preceding fiscal year.
      5. Discussion of historical financial statements or financial position
        1. The professional opinion must include comments on material items or changes in the issuer's financial statements together with appropriate commentary on items which may have particular relevance to the professional opinion including but not limited to unusual capital structures, unrecognized tax-loss carry forwards and redundant assets.
      6. Future oriented financial information
        1. To the extent that the valuer has relied upon future-oriented financial information, the valuer must disclose the future-oriented financial information, at least in summary form, unless otherwise determined by a decision of the special committee referred to in section 4274.
        2. To the extent that the future-oriented financial information relied upon by the valuer varies materially from the future-oriented financial information provided to the valuer by the issuer or the interested party, the valuer must disclose the nature and extent of such differences and the rationale of the valuer supporting its judgments.
      7. Future oriented financial information assumptions
        1. To the extent that future-oriented financial information is relied upon (whether or not the future-oriented financial information itself is disclosed), key financial assumptions (such as sales, growth rates, operating profit margins, major expense items, interest rates, tax rates, depreciation rates), together with a brief statement supporting the rationale for each specific assumption, must also be disclosed, unless otherwise determined by a decision of the special committee referred to in section 4274.
      8. Economic assumptions
        1. Any key economic assumptions having a material impact on the professional opinion must be disclosed, noting the authoritative source used by the valuer, including interest rates, exchange rates and general economic prospects in the relevant markets.
      9. Valuation approach, methodologies and analysis  

        The professional opinion must set out:
        1. the valuation approach and methodologies adopted by the valuer,
        2. together with the principal judgments made in selecting a particular approach or methodology,
        3. a comparison of valuation calculations and conclusions arrived at through the different methods considered and the relative importance of each methodology in arriving at the overall valuation conclusion, and
        4. the information in clauses 4275(2)(viii) through 4275(2)(xii), if relevant for the valuation techniques used.
      10. Discounted cash flow approach
        1. The professional opinion must include a discussion of all relevant qualitative and quantitative judgments used to calculate discount rates, multiples and capitalization rates.
        2. If the capital asset pricing model is used, disclosure must include the basis for determining the discount rate including the risk free rate, market risk premium, beta, tax rates and debt to equity capital structure assumed.
        3. The valuer must also disclose the basis for the determination of the terminal/residual value together with the underlying assumptions made.
        4. The source of the financial data which formed the basis of the discounted cash flow analysis, summary of major assumptions (if not already disclosed) and the details and sources of any economic statistics, commodity prices and market forecasts used in the valuation approach must also be disclosed.
        5. In addition, a summary of the sensitivity variables considered and the general results of the application of such sensitivity analysis must be disclosed along with an explanation of how such sensitivity analysis was used in the determination of the range of valuation estimates resulting from the discounted cash flow approach.
        6. Where the nature of the future-oriented financial information and the subject matter of the valuation make it reasonably practicable and meaningful to do so, selected quantitative sensitivity analyses performed by the valuer must be disclosed to illustrate the effects of variations in the key assumptions on the valuation results.
        7. In determining whether quantitative sensitivity analyses would be meaningful to the reader of the professional opinion, the valuer must consider whether such analyses adequately reflects the valuer's judgment concerning the inter-relationship of the key underlying assumptions.
      11. Asset based valuation approach
        1. The professional opinion must separately disclose the values of each significant asset and liability including off-statement of financial position items (unless otherwise determined by a decision of the special committee referred to in section 4274).
        2. If a liquidation based valuation approach has been utilized, the professional opinion must set out the liquidation values for each significant asset and liability together with summary estimates for significant liquidation costs.
      12. Comparable transaction approach
        1. The professional opinion must disclose (preferably in tabular form) a list of relevant transactions involving businesses the valuer considers similar or comparable to the business being valued.
        2. Adequate disclosure must include the date of the transaction, a brief descriptive note, and relevant multiples implicit in the transaction which may include: earnings before interest and taxes multiples; earnings before interest, taxes, depreciation and amortization multiples; earnings multiples; cash flow multiples; and book value multiples; and take-over premium percentages.
        3. In the body of the professional opinion there must be a discussion of such transactions together with an explanation as to how such transactions were used by the valuer in arriving at a valuation conclusion with regard to the comparable transaction approach.
      13. Comparable trading approach
        1. The professional opinion must disclose (preferably in tabular form) a list of relevant publicly traded companies the valuer considers similar or comparable to the business being valued.
        2. Adequate disclosure must include the date of the market data, the relevant fiscal periods for the comparable company, a brief descriptive note regarding the comparable company and relevant multiples implicit in the trading data which may include: earnings before interest and taxes multiples; earnings before interest, taxes depreciation and amortization multiples; earnings multiples, cash flow multiples; and book value multiples.
        3. In the body of the professional opinion there must be a discussion as to the comparability of such companies, together with an explanation as to how such data was used by the valuer in arriving at a valuation conclusion with regard to the comparable trading approach.
      14. Valuation conclusions
        1. The valuer must develop a final valuation range by using a single valuation methodology or some combination of value conclusions determined under different methodologies/approaches.
        2. The professional opinion must include a comparison of the valuation ranges developed under each methodology and a discussion of the reasoning in support of the valuer's final conclusion.

    There is no history log for this rule.

    There is no history log for this rule.