Fairness Opinion - Explained
What is a Fairness Opinion?
Written by Jason Gordon
Updated at October 5th, 2021
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What is a Fairness Opinion?
Fairness Opinion is a term commonly used in finance and investment market. It refers to the professional opinion given by a financial advisor, a professional third party or an investment bank on whether the terms and price of a transaction is favorable to both parties involved. Fairness opinion is given after the transaction has been properly evaluated. Fairness Opinion is crucial to both the acquiring company and the target company. This opinion is rendered in purchases, mergers, acquisitions, buyback and other related transactions. Analysts and financial advisors provide fairness opinion as a way of reducing risks and fraud in transactions.
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How Does a Fairness Opinion Work?
Fairness opinion is essential to both the seller and the buyer in a transaction. This include the acquiring company and the target company in mergers and acquisitions. This professional evaluation and opinion on prices of transactions are provided to ensure that the proposed price is fair to both parties. Fairness opinions are backed by a collection of data which is a result of careful examination and evaluation of a deal by professionals. Fairness Opinions are not rendered for free, financial advisors, investment banks and analysts do this in exchange for a fee. When a report on a deal is given by a professional, both parties trust this report and make decisions based on the report. It serves as guidance for the parties involved and provide a way of mitigating risks involved with transactions.