If you can answer this question without doubt, then your transaction does not require a Fairness Opinion: Can a minority shareholder bring a lawsuit against the controlling shareholder(s), Management or the Board of Directors claiming that the transaction that I/we want to pursue results in unfair treatment to the minority shareholder(s)?
Fiduciaries must be able to thoroughly defend and justify their decisions to shareholders and other stakeholders – especially in the context of sensitive or extraordinary transactions such as acquisitions, reorganizations, transactions with insiders, and private placements. Sound independent financial advice can help insulate directors and officers from legal challenges and liability.
Having a party that will receive a commission on the execution of the transaction also provide the Fairness Opinion is a conflict of interest and does not provide the same level of protection that an independent fairness opinion provides.
Purpose of a Fairness Opinion:
- Documents the results of the valuation process and the financial issues that were taken into consideration.
- Provide the board of directors with written assurances that the value arrived at is fair from a financial point of view.
- Provides tangible evidence that can be used in litigation to demonstrate that the board of directors acted reasonably and on a fully informed basis.
Fairness Opinions are especially relevant where a controlling shareholder or where one or more members of the Board of Directors, or Management have an interest in the transaction that may conflict with the interests of the Company’s shareholders. Fairness advice from an independent financial advisor can assure a board and its’ stakeholders that the decisions made by the board are fair and reasonable.
Click here to review a copy of our Fairness Opinion Guide
For ESOP transactions, a Letter of Adequate Consideration is oftentimes requested rather than a Fairness Opinion. The two are similar in that the goal is to provide the transaction fiduciary(ies) with financial guidance from a qualified firm. For more information on ESOP transactions, see our ESOP page.
Marshall & Stevens has been in the valuation business for more than 85 years and has substantial expertise in rendering Fairness Opinions in a wide variety of matters. Employing a high degree of thoroughness and diligence, our professionals bring a wealth of experience from backgrounds in valuation, law, investment banking, and accounting.