| Revision as of 07:26, 3 May 2012 edit96.251.19.198 (talk) →Equity and fairness← Previous edit | Latest revision as of 15:13, 6 May 2024 edit undoGhostInTheMachine (talk | contribs)Extended confirmed users, Page movers86,601 edits Changing short description from "Evaluation by a third party as to whether the terms of a merger, acquisition, buyback, spin-off, or privatization are fair" to "Evaluation of the terms of a transaction"Tag: Shortdesc helper | ||
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| {{Short description|Evaluation of the terms of a transaction}} | |||
| A '''fairness opinion''' is a ] ] by an ] or other third party as to whether the terms of a ], ], ], ], or ] are ].<ref></ref> It is rendered for a ].<ref></ref><ref></ref> | |||
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| |'''Example Fairness Opinions''' | |||
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| A '''fairness opinion''' is a ] ] by an ] or other third party as to whether the terms of a ], ], ], ], or ] are ].<ref>{{Cite web |url=http://jpkatz.com/services/fairness.php |title="About Fairness Opinions {{!}} JPKatz", ''JPKatz.com''. |access-date=2009-12-02 |archive-date=2010-12-13 |archive-url=https://web.archive.org/web/20101213163802/http://jpkatz.com/services/fairness.php |url-status=dead }}</ref> It is rendered for a ].<ref>{{Cite web |url=http://www.investorwords.com/1879/fairness_opinion.html |title="Definition, Fairness Opinion", ''Investorwords.com''. |access-date=2008-01-02 |archive-date=2007-12-31 |archive-url=https://web.archive.org/web/20071231083122/http://www.investorwords.com/1879/fairness_opinion.html |url-status=dead }}</ref><ref></ref> 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,<ref>{{Cite web |url=http://www.blackpartners.pl/fairness-opinion/ |title="Fairness Opinion in private transactions", ''Blackpartners.pl''. |access-date=2013-12-02 |archive-url=https://web.archive.org/web/20131203003946/http://www.blackpartners.pl/fairness-opinion/ |archive-date=2013-12-03 |url-status=dead }}</ref> as well as in circumstances other than mergers, such as a corporation exchanging debt for equity.<ref>Jill R. Goodman''New York Times'' Dealbook</ref> Some of the specific functions of a fairness opinion are to aid in decision-making, mitigate risk, and enhance communication.<ref>{{cite web|last1=Ferro|first1=John|last2=Benoit|first2=Bryan|title=Raising the Bar for Fairness Opinions |publisher=Transaction Advisors|issn=2329-9134|url=https://www.transactionadvisors.com/insights/raising-bar-fairness-opinions}}</ref> | |||
| ==Controversy== | ==Controversy== | ||
| Controversy in ] and ] circles surrounds the question of the objectivity of fairness opinions, as one aspect of the ] in the ] of a ]. A potential exists for a ] when an entity rendering an opinion may benefit from the transaction either directly or indirectly<ref></ref> |
Controversy in ] and ] circles surrounds the question of the objectivity of fairness opinions, as one aspect of the ] in the ] of a ]. A potential exists for a ] when an entity rendering an opinion may benefit from the transaction either directly or indirectly.<ref></ref> ] and ] of the companies also may have an interest in the outcome of the proposed transaction.<ref></ref> In response, in the United States, the ] (then the National Association of Securities Dealers) issued its Rule 2290 to require disclosure by its members to minimize abuses;<ref>, ], (November 6, 2007)</ref> this was approved in 2007 by the ].<ref>{{Dead link|date=August 2019 |bot=InternetArchiveBot |fix-attempted=yes }}</ref> | ||
| ==Equity and fairness== | ==Equity and fairness== | ||
| In the context of ] ],<ref></ref> the ] has required sufficient disclosures to “provide a balanced, truthful account of all matters”<ref>''Malone v. Brincat,'' 722 A.2d 5, 12 (Del. 1998)</ref> 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.”<ref>''In re Pure Resources, Inc. S’holders Litig.,'' 808 A.2d 421 (Del. Ch. 2002), pp. 447-8.</ref> In a ] in the CheckFree/] merger Chancellor Chandler underlined that the earlier ''In re Pure Resources'' Court had established the proper frame of analysis for disclosure of financial data: “tockholders 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.”<ref></ref> According to the certification hypothesis fairness opinions may also serve the interest of the shareholders by mitigating informational asymmetries in corporate transactions.<ref></ref> |
In the United States, in the context of ] ],<ref></ref> typically relating to the sale or merger of a public company, the ] has required sufficient disclosures be made to a board of directors and shareholders to “provide a balanced, truthful account of all matters”<ref>''Malone v. Brincat,'' 722 A.2d 5, 12 (Del. 1998)</ref> 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.”<ref>''In re Pure Resources, Inc. S’holders Litig.,'' 808 A.2d 421 (Del. Ch. 2002), pp. 447-8.</ref> In a ] in the CheckFree/] merger Chancellor Chandler underlined that the earlier ''In re Pure Resources'' Court had established the proper frame of analysis for disclosure of financial data: “tockholders 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.”<ref></ref> According to the certification hypothesis fairness opinions may also serve the interest of the shareholders by mitigating informational asymmetries in corporate transactions.<ref></ref> | ||
| First empirical evidence of fairness opinions in Europe indicates their relevance for shareholders <ref></ref>. | |||
| ==References== | ==References== | ||
| {{reflist}} | {{reflist}} | ||
| ==External links== | |||
| * from VC Experts.com | |||
| {{Corporate finance and investment banking}} | {{Corporate finance and investment banking}} | ||
| {{DEFAULTSORT:Fairness Opinion}} | {{DEFAULTSORT:Fairness Opinion}} | ||
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Latest revision as of 15:13, 6 May 2024
Evaluation of the terms of a transaction| Example Fairness Opinions |
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SEC filings relating to the 2009 merger of Merck & Co., Inc. and Schering-Plough Corporation: |
A fairness opinion is a professional evaluation by an investment bank or other third party as to whether the terms of a merger, acquisition, buyback, spin-off, or privatization are fair. It is rendered for a fee. 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 circles surrounds the question of the objectivity of fairness opinions, as one aspect of the duty of care in the fairness 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 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 (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.
Equity and fairness
In the United States, in the context of stockholder lawsuits, typically relating to the sale or merger of a public company, the Delaware Court of Chancery 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 in the CheckFree/Fiserv merger Chancellor Chandler underlined that the earlier In re Pure Resources Court had established the proper frame of analysis for disclosure of financial data: “tockholders 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.
References
- ""About Fairness Opinions | JPKatz", JPKatz.com". Archived from the original on 2010-12-13. Retrieved 2009-12-02.
- ""Definition, Fairness Opinion", Investorwords.com". Archived from the original on 2007-12-31. Retrieved 2008-01-02.
- Ralph Ward, "A Briefing On Fairness Opinions", Inc.com (February 2001).
- ""Fairness Opinion in private transactions", Blackpartners.pl". Archived from the original on 2013-12-03. Retrieved 2013-12-02.
- Jill R. GoodmanNew York Times Dealbook
- Ferro, John; Benoit, Bryan. "Raising the Bar for Fairness Opinions". Transaction Advisors. ISSN 2329-9134.
- Marie Leone, "Fairness Opinion Neutrality Questioned", CFO.com (February 2, 2006).
- Yasuhiro Ohta and Kenton K. Yee, "The Fairness Opinion Puzzle: Board Incentives, Information Asymmetry, and Bidding Strategy," Journal Of Legal Studies 37.1, pp. 229-272 (January 2008)
- "FINRA Rule 2290: Required Disclosures in Fairness Opinions", Cahill Gordon & Reindel, (November 6, 2007)
- "Fairness Opinions: SEC Approves New NASD Rule 2290 Regarding Fairness Opinions", FINRA Regulatory Notice 07-54. Effective Date: December 8, 2007.
- Steven M. Davidoff, "Fairness Opinions", American University Law Review, v. 55, p. 1557.
- Malone v. Brincat, 722 A.2d 5, 12 (Del. 1998)
- In re Pure Resources, Inc. S’holders Litig., 808 A.2d 421 (Del. Ch. 2002), pp. 447-8.
- In re CheckFree Corp. S’holders Litig., C.A. No. 3193-CC (Del. Ch. Oct. 18, 2007), Memorandum Opinion, Consolidated Civil Action No. 3193-CC (November 1, 2007).
- Pierfrancesco LaMura, Marc Steffen Rapp, Bernhard Schwetzler, Andreas Wilms, “The Certification Hypothesis of Fairness Opinions”, 2009)
