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Basics of Fairness Opinion


What is a Fairness Opinion? 


In the complex world of mergers and acquisitions (M&A), fairness opinions play a crucial role in safeguarding the interests of all parties involved. A fairness opinion is a formal report prepared by a financial advisor addressed to the body charged with the fiduciary duty or regulatory oversight that evaluates the fairness of the proposed transaction from a financial point of view. The opinion serves as an independent assessment of whether the proposed consideration is fair from the financial point of view to the shareholders or other stakeholders of the company being acquired or merged.


February 5, 2024

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Anastasia I. Bourgeois


What is the Purpose of a Fairness Opinion?

The primary purpose of a fairness opinion is to provide the board of directors of a target company with an objective and unbiased assessment of the fairness of the proposed transaction from a financial point of view. This assessment helps the board fulfill its fiduciary duty to shareholders by ensuring that they are receiving adequate consideration for their shares. Fairness opinions are also often used by acquirers to support their financing arrangements. Lenders and investors may require a fairness opinion as a condition of providing financing for an acquisition.

Who Needs a Fairness Opinion?

Fairness opinions are typically sought by boards of directors, special committees, or other fiduciaries who have a responsibility to act in the best interests of their shareholders. 

When is a Fairness Opinion Needed?

Fairness opinions are frequently required in various corporate transactions, including:

•    Mergers and Acquisitions (M&A): When one company acquires another, a fairness opinion is often obtained to ensure that the acquiring company is offering a fair price for the target company.

•    Management Buyouts (MBOs): When management takes a company private, a fairness opinion is often obtained to ensure that minority shareholders are receiving fair compensation for their shares.

•    Spin-offs: When a company divests a portion of its business, a fairness opinion may be obtained to ensure that the spin-off is being conducted in a fair and equitable manner.

What Factors Are Considered in a Fairness Opinion?

Financial advisors consider various factors when evaluating the fairness of a proposed transaction, including:

•    Financial analysis: This involves a thorough assessment of the company's financial statements, including its revenue, expenses, assets, liabilities, and cash flow.

•    Industry analysis: This involves understanding the company's industry, competitive landscape, and market trends.

•    Valuation methodologies: Various valuation methodologies are employed to determine the company's fair market value. These methodologies may include discounted cash flow analysis, comparable company analysis, and precedent transaction analysis.


What are the Key Elements of a Fairness Opinion? 

A fairness opinion typically includes the following elements:

  • A detailed analysis of the valuation methodologies used to determine the consideration offered.

  • An assessment of the relevant market factors and comparable transactions.

  • A conclusion on whether the consideration offered is fair from a financial standpoint.

The Benefits of a Fairness Opinion

Fairness opinions offer several benefits to all parties involved in a corporate transaction:


  • Enhanced transparency: Fairness opinions provide transparency and objectivity to the valuation process, ensuring that all parties are well-informed about the company's value.

  • Empowered decision making: Fairness opinions that provide an unbiased view of the contemplated transaction using a well-founded and credible analysis to aid fiduciaries in the decision-making process.


  • Improved deal certainty: Fairness opinions can increase the likelihood of successful deal completion by resolving valuation disputes and building confidence among shareholders.

  • Reduced risk of litigation: Fairness opinions can help mitigate the risk of shareholder lawsuits by providing evidence that the board exercised due care in its deliberations on a proposed transaction by obtaining the opinion on an independent financial advisor, demonstrating that the board of directors acted in the best interests of shareholders.

What are the Typical Fees for Performing Fairness Opinion Engagements?

Typical fees for fairness opinion engagements for public companies in the U.S. can range widely, depending on several factors, but generally start in the hundreds of thousands of dollars and can reach several million dollars. Click here to read more about the fees for fairness opinions. 


Fairness opinions serve as critical tools for ensuring fairness and informed decision-making in complex corporate transactions. By engaging qualified financial experts to provide independent assessments, companies can protect the interests of their shareholders and stakeholders while navigating the intricacies of mergers, acquisitions, and other significant transactions.



Clements & Wisler (2005). The Standard & Poor's Guide to Fairness Opinions. McGraw-Hill. 

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