System and method of generating investment criteria for an investment vehicle that includes a pool of escrow deposits from a plurality of merger and acquisition transactions

• US 8,706,599 B1
• Filed: 11/08/2012
• Issued: 04/22/2014
• Est. Priority Date: 08/24/2012
• Status: Active Grant

• Current Assignee: Acquiom Holdings LLC
• Original Assignee: Shareholder Representative Services LLC (SRS Acquiom, Inc.)
• Inventors: Kramer, Glenn A., Vogel, Mark B., Koenig, William P.
• Primary Examiner(s): Weis, Seth
• Application Number:
  US13/672,139
• Time in Patent Office: 530 Days
• Field of Search: 705 35- 45
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

An automated method is provided for generating investment criteria for an investment vehicle that includes a pool of escrow deposits from a plurality of merger and acquisition transactions. An escrow history database is maintained of data derived from historical behavior of escrows from a plurality of previous merger and acquisition transactions. An escrow pool database is maintained of current escrow deposit data from a plurality of current merger and acquisition transactions. The escrow pool database includes the current deposit amounts in the pool of escrow deposits, and stated terms governing the release of each deposit amount in the pool of the escrow deposits. A set of investment criteria for selecting an asset pool is generated using a processor operating on the escrow history database and the escrow pool database. The set of investment criteria includes maturity metrics selected from the group consisting of weighted average maturity, convexity, and maturity distribution profile.

Claims

1. An automated method of generating investment criteria for an investment vehicle that includes a pool of escrow deposits, the deposits being from a plurality of merger and acquisition transactions, the method comprising:

(a) maintaining an escrow history database of data derived from historical behavior of escrows from a plurality of previous merger and acquisition transactions;

(b) maintaining an escrow pool database of current escrow deposit data from a plurality of current merger and acquisition transactions, the escrow pool database including;

(i) the current deposit amounts in the pool of escrow deposits, and

(ii) stated terms governing the release of each deposit amount in the pool of the escrow deposits; and

(c) generating, using a processor operating on the escrow history database and the escrow pool database, a set of investment criteria for selecting an asset pool, wherein the set of investment criteria includes maturity metrics selected from the group consisting of weighted average maturity, convexity, and maturity distribution profile.

2. The method of claim 1 wherein the data in the escrow history database of step (a) is based on actual historic escrow deposits, including:

(i) historic escrow cash inflows, and

(ii) historic escrow cash outflows.

3. The method of claim 2 wherein the escrow history database of step (a) further includes:

(iii) historic information on claims made against the escrow deposits and their effect on the timing of escrow outflows.

4. The method of claim 2 wherein the actual historic escrow deposits of step (a) have stated terms governing the release of each deposit, and step (a) further includes:

(iii) historic information on the variance of cash flows from the stated terms, and

(iv) historic information on the reasons for the variance of cash flows.

5. The method of claim 1 further comprising:

(d) generating, using the processor, a metric for the risk of a loss of value of the pool of escrow deposits that are invested in the investment vehicle accordance with the set of investment criteria generated in step (c), thereby allowing a third party to provide contractual protection against loss of value.

6. The method of claim 5 wherein the third-party contractual protection is used to allow for book value accounting in the calculation of payouts from the investment vehicle.

7. The method of claim 1, wherein the data in the escrow history database of step (a) is a set of rules computed from analysis of historic escrow cash inflows and historic escrow cash outflows of a group of actual historic escrow deposits.

8. The method of claim 1 wherein the escrow pool database of step (b) further includes:

(iii) information on the rate at which escrows are expected to be added to the pool, including escrow size and escrow duration.

9. The method of claim 1 wherein the set of investment criteria of step (c) further includes metrics selected from the group consisting of sensitivity of asset selection to interest rate changes, sensitivity of asset selection to predicted rates of continuing escrow cash inflows, sensitivity of asset selection to escrow duration, diversification metrics, concentration metrics, and risk metrics.

10. The method of claim 1 wherein the generating in step (c) uses stochastic simulation methods to create best case and worst case scenarios for the value of the pool of escrows given a distribution of rates, sizes, and durations of new escrows.

11. The method of claim 1 wherein the investment vehicle is selected from the group consisting of an investment fund, a collective trust, and a total return swap.

12. The method of claim 1 wherein step (c) is repeated whenever:

(i) new escrow deposits are received, or

(ii) an indemnification claim is made against an escrow deposit, or

(iii) a payout is made from an escrow, or

(iv) an investment manager of the investment vehicle is notified of a pending cash outflow from an escrow other than a payout.

13. A non-transitory, tangible computer program product for generating investment criteria for an investment vehicle that includes a pool of escrow deposits, the deposits being from a plurality of merger and acquisition transactions, the computer program product comprising computer-readable media encoded with instructions for execution by a processor to perform a method comprising:

(a) maintaining an escrow history database of data derived from historical behavior of escrows from a plurality of previous merger and acquisition transactions;

(b) maintaining an escrow pool database of current escrow deposit data from a plurality of current merger and acquisition transactions, the escrow pool database including;

(i) the current deposit amounts in the pool of escrow deposits, and

(ii) stated terms governing the release of each deposit amount in the pool of the escrow deposits; and

(c) generating, using the processor operating on the escrow history database and the escrow pool database, a set of investment criteria for selecting an asset pool, wherein the set of investment criteria includes maturity metrics selected from the group consisting of weighted average maturity, convexity, and maturity distribution profile.

14. The computer program product of claim 13 wherein the data in the escrow history database of step (a) is based on actual historic escrow deposits, including:

(i) historic escrow cash inflows, and

(ii) historic escrow cash outflows.

15. The computer program product of claim 13 wherein the instructions for execution by the processor perform a method further comprising:

(d) generating, using the processor, a metric for the risk of a loss of value of the pool of escrow deposits that are invested in the investment vehicle accordance with the set of investment criteria generated in step (c), thereby allowing a third party to provide contractual protection against loss of value.

16. The computer program product of claim 13 wherein the data in the escrow history database of step (a) is a set of rules computed from analysis of historic escrow cash inflows and historic escrow cash outflows of a group of actual historic escrow deposits.

17. The computer program product of claim 13 wherein the escrow pool database of step (b) further includes:

(iii) information on the rate at which escrows are expected to be added to the pool, including escrow size and escrow duration.

18. The computer program product of claim 13 wherein the generating in step (c) uses stochastic simulation methods to create best case and worst case scenarios for the value of the pool of escrows given a distribution of rates, sizes, and durations of new escrows.

19. The computer program product of claim 13 wherein the investment vehicle is selected from the group consisting of an investment fund, a collective trust, and a total return swap.

20. The computer program product of claim 13 wherein step (c) is repeated whenever:

(i) new escrow deposits are received, or

(ii) an indemnification claim is made against an escrow deposit, or

(iii) a payout is made from an escrow, or

(iv) an investment manager of the investment vehicle is notified of a pending cash outflow from an escrow other than a payout.