When is a Fairness Opinion Needed?

The utility of fairness opinions is singular and self-evident.  “They represent the judgment of an independent and experienced professional, applying recognized principles of valuation, about the fairness to its clients or stockholders of the financial terms of a transaction.”  NEED TO ATTRIBUTE THIS QUOTE???

CONFLICTS

When there is potential for stakeholders to question the motivation for a transaction.  Examples include:

  • Related party transactions
  • Lack of outside board members
  • Controlling shareholder with “Power” and/or passive shareholders (perception of) abuse by control ??

DILUTION

When shareholders will be diluted in their ownership or experience a loss of value.  Examples include:

  •  Mandated by stock exchange or regulatory authority
  • Transactions in private companies with multiple classes of stock.
  • Changing capital structure
  • Divestiture or spin-off of material corporate assets

MANDATED

When a stock exchange or regulatory authority

  • When a Board of Directors or CEO is concerned about the support or acceptance of a proposed/potential transaction.
  • Companies pursuing or finalizing a transaction.
  • Related party transactions
  • Controlling shareholder with “Power” and/or passive shareholders
  • Lack of outside board members