In recent years, fairness opinions are being used more and more frequently to give a board of directors, special committees, and other involved parties with an independent, objective analysis of a transaction on the table. A fairness opinion is beneficial because it looks at the proposed transaction from the point of view of one or more parties involved to help ensure that the deal is fair to all parties.
While fairness opinions begin with an informal valuation, they provide more depth. They also consider the transaction’s terms, financial structuring with earnouts or contingency payments, employment agreements, and other financial or tax consequences.
When a transaction is in the works, having a fairness opinion is often a fiduciary requirement that may exist between the board of directors, stockholders, and investors. It can also help prevent disagreements among the involved parties.