Fairness Opinion defined: A Fairness Opinion is an analysis provided by a retained third party, in connection with a merger or acquisition, representing that the price being paid to the selling shareholders in the transaction is a fair price. Fairness Opinions are typically provided by an investment banking firm, accounting firm, company valuation firm, certified business appraiser, or other similar experienced financial professional or firm. The professional or firm providing the Fairness Opinion will usually analyze a series of factors and methodologies – including using comparable recent sales of similar companies – to present a range of fair values. As long as the selling price being paid for the company involved in the M&A transaction falls within this range of fair values, then the Fairness Opinion will state that the price bring paid for the target company is a “fair” one. (If the price being paid is lower than than the fair value range, then in theory the Fairness Opinion would state that the price being paid is unfair, although in practice this rarely happens.) The Board of Directors of a company being sold will often obtain a Fairness Opinion to protect it from later stockholder lawsuits alleging that they sold the company for too low a price. (Note that since the professional or firm providing the Fairness Opinion is being paid a substantial fee for providing its Fairness Opinion, there’s some controversy about whether Fairness Opinions are objective and independent.)
Above is a definition for “Fairness Opinion” from PrivCo’s Private Company Knowledge Bank, the definitive online and e-book guide to private companies and private company deals.
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