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Fairness Opinion Fees Explained

PRACTICE AREAS

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.

Published:

February 5, 2024

Key Contact:

Anastasia I. Bourgeois

Director

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. Typical fairness opinion fees can vary depending on several factors, including:

  • Transaction size: The size of the proposed transaction is a primary determinant of fairness opinion fees. Larger deals typically involve more complex analyses and require more extensive due diligence, leading to higher fees. 

  • Complexity of the transaction: The complexity of the transaction structure and the involvement of multiple parties can also influence fees. Mergers and acquisitions (M&A) with numerous subsidiaries, intricate financing arrangements, or cross-border aspects may require more specialized expertise and result in higher fees compared to straightforward transactions.

  • Reputation and experience of the financial advisor: Well-known financial advisors with a strong track record in fairness opinions may charge premium fees due to their perceived expertise and credibility. Smaller or less established advisors may offer lower fees to attract clients, but their opinions may carry less weight with regulatory bodies and shareholders.

  • Scope of work: The agreed-upon scope of work for the fairness opinion can also impact fees. A broader scope, encompassing extensive financial analyses, sensitivity testing, and detailed reports, will generally result in higher fees compared to a more limited scope.

 

By understanding the factors influencing fairness opinion fees and navigating the engagement process with informed expectations, public companies can ensure they receive valuable expert guidance while managing costs effectively. Remember, a fairness opinion plays a crucial role in protecting shareholder interests, and choosing the right advisor and fee structure is an essential part of responsible decision-making.

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