Are the preliminary estimates of fair value subject to change for Caption By Hyatt?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
Our consolidated balance sheet at December 31, 2024 reflects preliminary estimates of the fair value of the assets acquired and liabilities assumed based on available information as of the acquisition date. The fair values of intangible assets acquired were estimated using either discounted future cash flow models or the relief from royalty method, both of which include revenue projections based on the expected contract terms and long-term growth rates, which are primarily Level Three assumptions. The fair values of performance guarantee liabilities assumed were estimated using Monte Carlo simulations to model the probability of possible outcomes. The valuation methodology includes assumptions and judgments regarding discount rates, volatility, and hotel operating results, which are primarily Level Three assumptions (see Note 15). The remaining assets and liabilities were recorded at their carrying values, which approximate their fair values.
We will continue to evaluate the contracts acquired and the underlying inputs and assumptions used in our valuation of assets acquired and liabilities assumed. Accordingly, these estimates, along with any related tax impacts, are subject to change during the measurement period, which is up to one year from the date of acquisition.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Caption By Hyatt's 2025 Franchise Disclosure Document, the preliminary estimates of fair value of assets acquired and liabilities assumed are subject to change. Specifically, the consolidated balance sheet reflects these preliminary estimates based on available information as of the acquisition date. These fair values are estimated using methods like discounted future cash flow models or the relief from royalty method, which rely on revenue projections, contract terms, and long-term growth rates. These estimations also consider factors such as discount rates, volatility, and hotel operating results. These inputs are considered Level Three assumptions.
Caption By Hyatt will continue to assess the acquired contracts and the underlying inputs and assumptions used in the valuation of these assets and liabilities. As a result, the initial estimates and any related tax impacts may change during a measurement period that extends up to one year from the acquisition date. This ongoing evaluation and potential for change are important for prospective franchisees to understand, as they can influence the financial picture of the acquired entities.
This flexibility in valuation is typical in large acquisitions where complete information may not be immediately available. The FDD provides transparency by acknowledging that these figures are preliminary and subject to revision as more data becomes available and as Caption By Hyatt continues its due diligence. For a potential Caption By Hyatt franchisee, this means that the initial financial statements should be viewed as a starting point, with the understanding that adjustments may occur as the company refines its understanding of the acquired assets and liabilities.