A fairness opinion is a

professional A professional is a member of a profession or any person who works in a specified professional activity. The term also describes the standards of education and training that prepare members of the profession with the particular knowledge and ski ...

evaluation Evaluation is a systematic determination and assessment of a subject's merit, worth and significance, using criteria governed by a set of standards. It can assist an organization, program, design, project or any other intervention or initiative ...

by an

investment bank Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing is ...

or other third party as to whether the terms of a

merger Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...

acquisition Acquisition may refer to: * Takeover, the purchase of one company by another * Mergers and acquisitions, transactions in which the ownership of companies or their operating units are transferred or consolidated with other entities * Procurement, ...

, buyback, spin-off, or

privatization Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...

are fair. It is rendered for a

fee A fee is the price one pays as remuneration for rights or services. Fees usually allow for overhead, wages, costs, and markup. Traditionally, professionals in the United Kingdom (and previously the Republic of Ireland) receive a fee in contra ...

. They are typically issued when a public company is being sold, merged or divested of all or a substantial division of their business. They can also be required in private transactions not involving a company that is traded on a public exchange, as well as in circumstances other than mergers, such as a corporation exchanging debt for equity. Some of the specific functions of a fairness opinion are to aid in decision-making, mitigate risk, and enhance communication.

Controversy

Controversy in financial and

management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activities ...

circles surrounds the question of the objectivity of fairness opinions, as one aspect of the

duty of care In tort law, a duty of care is a legal obligation that is imposed on an individual, requiring adherence to a standard of reasonable care while performing any acts that could foreseeably harm others. It is the first element that must be establ ...

in the

fairness Fairness or being fair can refer to: * Justice * The character in the award-nominated musical comedy '' A Theory of Justice: The Musical.'' * Equity (law), a legal principle allowing for the use of discretion and fairness when applying justice ...

of a transaction. A potential exists for a conflict of interest when an entity rendering an opinion may benefit from the transaction either directly or indirectly. Directors and

officers An officer is a person who has a position of authority in a hierarchical organization. The term derives from Old French ''oficier'' "officer, official" (early 14c., Modern French ''officier''), from Medieval Latin ''officiarius'' "an officer," fro ...

of the companies also may have an interest in the outcome of the proposed transaction. In response, in the United States, the

Financial Industry Regulatory Authority The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization (SRO) that regulates member brokerage firms and exchange markets. FINRA is the successor to the National Associat ...

(then the National Association of Securities Dealers) issued its Rule 2290 to require disclosure by its members to minimize abuses; this was approved in 2007 by the

Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against mark ...

Equity and fairness

In the United States, in the context of

stockholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal ow ...

lawsuits - A lawsuit is a proceeding by a party or parties against another in the civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used in reference to a civil actio ...

, typically relating to the sale or merger of a public company, the

Delaware Court of Chancery The Delaware Court of Chancery is a court of equity in the American state of Delaware. It is one of Delaware's three constitutional courts, along with the Supreme Court and Superior Court. Since 2018, the court consists of seven judges. The chi ...

has required sufficient disclosures be made to a board of directors and shareholders to “provide a balanced, truthful account of all matters” and said “When a document ventures into certain subjects, it must do so in a manner that is materially complete and unbiased by the omission of material facts.” In a

Memorandum Opinion Under United States legal practice, a memorandum opinion is usually unpublished and cannot be cited as precedent. It is formally defined as: " unanimous appellate opinion that succinctly states the decision of the court; an opinion that briefly re ...

in the CheckFree/

Fiserv Fiserv, Inc. () is an American multinational company headquartered in Brookfield, Wisconsin that provides financial technology services to clients across the financial services sector, including: banks, thrifts, credit unions, securities bro ...

merger Chancellor Chandler underlined that the earlier ''In re Pure Resources'' Court had established the proper frame of analysis for disclosure of financial data: “ ockholders are entitled to a fair summary of the substantive work performed by the investment bankers upon whose advice the recommendations of their board as to how to vote on a merger or tender rely.” According to the certification hypothesis fairness opinions may also serve the interest of the shareholders by mitigating informational asymmetries in corporate transactions.Pierfrancesco LaMura, Marc Steffen Rapp, Bernhard Schwetzler, Andreas Wilms, “The Certification Hypothesis of Fairness Opinions”, 2009)
/ref>

References

External links

Example Fairness Opinions ( SEC filings) relating t
the merger
of Merck & Co., Inc. and

Schering-Plough Corporation Schering-Plough Corporation was an American pharmaceutical company. It was originally the U.S. subsidiary of the German company Schering AG, which was founded in 1851 by Ernst Christian Friedrich Schering. As a result of nationalization, it becam ...

:
J.P. Morgan
{{DEFAULTSORT:Fairness Opinion Mergers and acquisitions