A fairness opinion is a written report that addresses whether a transaction, usually a sale or merger, will result in the shareholders of a selling or merging corporation receiving adequate or fair compensation.

A fairness opinion can and should be obtained prior to the selling or merging corporation making a final commitment to a proposed transaction. They are often obtained when multiple offers are received with different terms. It can also be obtained after the contract has been signed, but ideally, it will be obtained before that time.

Fairness opinions are usually obtained by the directors of a corporation to reduce the risk of litigation. It is not uncommon for shareholders to challenge transactions before they close and after they close making the claim that the shareholders are not receiving adequate or fair consideration. These claims are most common when the directors of the selling or merging corporation will be receiving substantial bonus payments as part of the transaction.

Fairness opinions are written by qualified individuals including business appraisers, business brokers, and investment bankers. Depending upon the size and complexity of the transaction, the writer of a fairness opinion should be fully prepared to defend his or her opinion in a court of law in the event of litigation.

A fairness opinion must be written by an expert that is not involved in the transaction either directly or indirectly. No conflict of interest or even the appearance of a potential conflict should exist. The senior management of Pacific Business Advisors is available to write opinion letters for transactions in California.

Certified Business Valuations - Appraisals

Expert Witnesses - California