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A fairness opinion is a financial advisor's perspective as to whether the price to be paid or received in a transaction is fair to the client's shareholders.
A fairness opinion is a report that evaluates the facts of a merger, acquisition, carve out, spin-off, buyback or another type of purchase and provides an opinion as to whether or not the proposed stock price is fair to the selling or target company.
Ing to the National Association of Securities Dealers (NASD) Rule 2290(a), analysts issuing a fairness opinion must disclose any material relationship with parties to the transaction in the two years prior to issuing the fairness opinion.
Q: What's the difference between a fairness opinion vs. valuation? A: Both are important in a large transaction. Valuation though informs an actual transaction price, while the fairness opinion concludes how reasonable that price is.
Fairness opinions are regularly obtained by boards, special committees and other fiduciaries to gain a comprehensive understanding of the financial aspects of a transaction and to demonstrate they have made their decision with due care.
Dimech-DeBono: Both valuations and fairness opinions play a key role in the decision making process around a transaction. It sounds simple enough that the valuation range should inform the transaction price and the fairness opinion should inform the reasonableness of such price and general terms of the transaction.
A certificate which contains a copy of the board resolution setting out the powers, designations, preferences or rights of a class or series of a class of stock of a corporation (typically a series of preferred stock) if they are not already contained in the certificate of incorporation of the corporation.
A Fairness Opinion Example Say that Company X has made an offer to purchase Company Z. As part of doing due diligence, the leadership board of Company Z decides to work with an objective advisory firm independent of the deal to obtain a fairness opinion.