For almost 40 years, Fairness Opinions have been used as a critical part of the mergers and acquisitions process. A fairness opinion is a financial advisor’s opinion that states whether or not the financial terms of a proposed transaction are within a range of fairness, expressed from an economic point of view to one or more specific parties of the proposed transaction as of a particular date. By hiring a third-party financial advisor to issue a fairness opinion, company boards and trustees are able to mitigate risk and help fulfill their fiduciary responsibilities to their shareholders. Fairness Opinions have become a regular feature of corporate transactions since 1985 when the Delaware Supreme Court issued its opinion in the landmark case Smith v. Van Gorkum.
In Smith v. Van Gorkum, the Court found that a corporate board (Trans Union Corporation) breached its fiduciary duty of care by approving a merger without:
- understanding adequate information on the transaction
- including details on the value of the company
- reviewing the the fairness of the offering price
It was not the price itself that was questioned, only that there was no independent evidence that the price was fair. Therefore, when preparing a fairness opinion, the financial advisor must analyze sufficient independent information and data to ensure adequate evidence has been reviewed. Critical information may include transaction documents, letters of intent (LOIs), audited financial statements, financial projections, Investment Banking analysis, and public and private transaction data. The analysis results (Fairness Opinion Letter and Analysis) will support the advisor’s conclusion on whether the transaction is fair and helps ensure the board has sufficient evidence to rely on when considering a transaction. Given the complex nature of many transactions, using third-party financial advisors can also help provide the sophisticated analysis tools needed to assess financial terms and provide clarity.
Evergreen’s Approach:
The Evergreen Advisors Fairness Opinion Committee has provided boards of both public and private companies with independent, expert advice as part of the board’s fiduciary obligations to the shareholders. We provide opinions on whether the consideration received in a transaction is fair from a financial point of view, using rigorous financial analysis and due diligence. Our Fairness Opinion Committee is composed of senior leadership, ensuring that every opinion we conduct is accurate, logically supported, and follows best practices and regulatory guidance.
Clients Include:
- Corporate Boards
- Special Committees
- Trustees
- Other Fiduciaries
Have questions? Please contact us at 410-997-6000.
About Evergreen Advisors
Evergreen Advisors is a middle-market investment bank and corporate advisory firm focused on servicing organizations throughout their financial lifecycles to drive successful outcomes. Serving the Mid-Atlantic region including Maryland, Washington D.C., Virginia, and Pennsylvania, Evergreen Advisors, LLC was formed in 2001 to provide innovative and strategic solutions to meet our client’s evolving business needs.
Securities transactions conducted through Evergreen Advisors Capital/Member FINRA/SIPC.
