Definition

A fairness opinion is a professional evaluation by an investment bank or other third party as to whether the terms of a merger, acquisition, buyback, spin-off, or privatization are fair. It is rendered for a fee. They are typically issued when a public company is being sold, merged or divested of all or a substantial division of their business. They can also be required in private transactions not involving a company that is traded on a public exchange, as well as in circumstances other than mergers, such as a corporation exchanging debt for equity. Some of the specific functions of a fairness opinion are to aid in decision-making, mitigate risk, and enhance communication.

What is 'Fairness Opinion'

A report evaluating the facts of a merger or acquisition. Fairness opinions are compiled by qualified analysts or advisors, usually of an investment bank, for key decision makers. The report examines the fairness of the offered acquisition price.

Explaining 'Fairness Opinion'

A fairness opinion provides guidance to the parties involved in a merger, takeover or acquisition. This could include the shareholders of the company being acquired or the acquiring company. It is essentially a professional opinion supported by collected data, for a fee.

Further Reading

Fairness opinions in mergers and acquisitions
papers.ssrn.com [PDF]
… presented by the Center for Corporate Governance, College of Business and Economics, University of … target firms in that sub-period that reported obtain- ing a fairness opinion and/or … Firms that obtained fairness opinions may have also obtained advisory services from the same …

Are fairness opinions fair? The case of mergers and acquisitions
www.sciencedirect.com [PDF]
… presented by the Center for Corporate Governance, College of Business and Economics, University of … target firms in that sub-period that reported obtain- ing a fairness opinion and/or … Firms that obtained fairness opinions may have also obtained advisory services from the same …

Information production by investment banks: Evidence from fairness opinions
www.journals.uchicago.edu [PDF]
… presented by the Center for Corporate Governance, College of Business and Economics, University of … target firms in that sub-period that reported obtain- ing a fairness opinion and/or … Firms that obtained fairness opinions may have also obtained advisory services from the same …

Enhancing the value of fairness opinions: Limiting risk in the post-enron era
www.ingentaconnect.com [PDF]
… presented by the Center for Corporate Governance, College of Business and Economics, University of … target firms in that sub-period that reported obtain- ing a fairness opinion and/or … Firms that obtained fairness opinions may have also obtained advisory services from the same …

The Information Provision in the Corporate Acquisition Process: Why Target Firms Obtain Multiple Fairness Opinions
meridian.allenpress.com [PDF]
… presented by the Center for Corporate Governance, College of Business and Economics, University of … target firms in that sub-period that reported obtain- ing a fairness opinion and/or … Firms that obtained fairness opinions may have also obtained advisory services from the same …

The certification hypothesis of fairness opinions for acquiring firms
www.sciencedirect.com [PDF]
… presented by the Center for Corporate Governance, College of Business and Economics, University of … target firms in that sub-period that reported obtain- ing a fairness opinion and/or … Firms that obtained fairness opinions may have also obtained advisory services from the same …

An Economic and Behavioral Analysis of Investment Bankers When Delivering Fairness Opinions
heinonline.org [PDF]
… presented by the Center for Corporate Governance, College of Business and Economics, University of … target firms in that sub-period that reported obtain- ing a fairness opinion and/or … Firms that obtained fairness opinions may have also obtained advisory services from the same …