The global financial crisis has triggered calls for transparency and accountability, with firms having to defend their decisions more frequently, according to data from Duff & Phelps’ recently released Fairness Opinion Survey. In fact, slightly more than two-thirds (68%) of the senior corporate executives queried for their views on the use of fairness opinions thought that boards of directors have become more concerned with potential shareholder lawsuits over the past five years. Additional data show that:
- When asked about the greatest benefit of fairness opinions, 56% of respondents said, “insight into market transactions and valuation multiples” were “by far the greatest benefit of fairness opinions,” and 42% believed that fairness opinion analysis was most useful because of its insight into other valuation related issues.
- The majority of respondents believed that fairness opinions help protect the companies and directors against shareholder suits, with 72% of US respondents and 78% of European respondents obtaining fairness opinions for M&A transactions to provide their boards with an independent analysis of the deal.
- Survey respondents expected to commission fairness opinions for a variety of transactions other than M&A deals. Specifically, 69% of respondents said they would obtain a fairness opinion for related-party transactions. Forty-six percent noted that they would obtain a fairness opinion for restructurings, which are likely to increase in the upcoming year given the unusually high volume of distressed companies.
Want more information on fairness opinions? Later this summer, BVR will publish a new, comprehensive guide on fairness opinions that will be edited by Willamette Management Associates (WMA). In addition, the Winter 2009 edition of Insights, published by WMA, includes two must-read articles on the subject. One article, Factors to Consider in Performing a Valuation Analysis for a Fairness Opinion, authored by Craig Jacobson, is accessible online at willamette.com.
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