Fairness Opinions in Today’s Legal and Economic Environments

May 2012 978-1-62150-002-5 PDF (152 pages)

BVR (editor)

Business Valuation Resources, LLC

The independent analysis within a fairness opinion delivers the evidence that a board of directors has fulfilled its fiduciary duty when considering a financial transaction.  The fairness opinion is a fairly recent phenomenon – and a business valuation exercise that continues to evolve.


Fairness Opinions in Today’s Legal and Economic Environments: A BVR Special Report
 helps advisors understand their roles, the process of analyzing fairness, and the process and pitfalls of issuing fairness opinions. The Special Report contains a series of articles that examine fairness opinions from a number of angles, including the role of independent advisors, the effects of certain market conditions on the demand for fairness opinions, controversies surrounding fairness opinions, and the current state of fairness opinions from a regulatory perspective. 

An essential for advisors who issue fairness opinions and board directors who seek them, this special report presents insights into issues that have evolved over time and the impact of changing economic and legal conditions.

Highlights Include:

  • Role of independent advisors
  • Effects of certain market conditions on the demand for fairness opinions
  • Controversies surrounding fairness opinions
  • Current state of fairness opinions from a regulatory perspective
  • Insights into issues that have evolved over time and the impact of the changing economic and legal conditions
  • Contributions from experts in the business valuation profession, including Robert Buchanan, Joel Johnson, Chip Brown, Steve Whittington, Gilbert Matthews, Scott Cobb, and Nguyen “Wen” Ho
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  • INTRODUCTION: WHAT IS A FAIRNESS OPINION AND WHY IS IT IMPORTANT? 
    By Robert H. Buchanan, J.D., ASA
  • VOLATILITY CREATES DEMAND FOR FAIRNESS OPINIONS, TARBELL SAYS
  • WHY GET A FAIRNESS OPINION FOR A PRIVATELY HELD COMPANY?
    By Robert H. Buchanan, J.D., ASA
  • WHO NEEDS A FAIRNESS OPINION?
    By Joel Johnson, ASA
    • Contents of a Fairness Opinion
    • Reviewing a Fairness Opinion
    • Pricing of Fairness Opinions
    • Conclusion
  • DISCUSSION: FAIRNESS OPINIONS IN TODAY’S ECONOMY
    THE ROLE OF THE INDEPENDENT FINANCIAL ADVISER IN M&A FAIRNESS OPINIONS
    By Chip Brown, CPA/ABV, CFA, CFF, and Steve Whittington, CFA
    • Introduction
    • Fairness Opinion Content
    • Why a Fairness Opinion Needs to Be Independent and Objective
    • The Role of the Transaction Financial Intermediary Versus the Role of the Independent
      Financial Adviser
    • ‘Top 10’ Factors to Consider Regarding Financial Intermediary Fairness Opinions
    • Summary and Conclusion
  • PIERCING THE ARMOR—CONFLICTS OF INTEREST IN FAIRNESS OPINIONS
    By Robert H. Buchanan, J.D., ASA
  • FAIRNESS OPINIONS IN AFFILIATED PARTY TRANSACTIONS
    Gilbert E. Matthews, CFA, and Michelle Patterson, J.D., Ph.D.
    • Introduction
    • Delaware’s Influence on Fairness Opinions in Affiliated Party Transactions
    • Governmental and Professional Requirements for Fairness Opinions
    • Fairness Opinions in Practice
    • Price Less Than the Highest Bid Can Be Fair
    • The Need for Heightened Due Diligence in Affiliated Party Transactions
  • PITFALLS IN FAIRNESS OPINION VALUATIONS
    By Gilbert E. Matthews, CFA
    • Importance in Litigation
    • Pitfalls in Valuation
  • FAIRNESS OPINION CASE STUDY: BUSINESS JUDGMENT RULE PROTECTION
    By Robert H. Buchanan, J.D., ASA
    • $41.5 Million Settlement
    • Business Judgment Rule Protection
  • THE EFFECT OF THE SEC APPROVAL OF RULE 2290 ON TRANSACTIONAL FAIRNESS OPINIONS
    By Scott Cobb, CFA and Nguyen “Wen” Ho, CFA, CPA
    • Introduction
    • Why Fairness Opinions Have a Questionable Reputation
    • Regulatory Review of the Fairness Opinion Process
    • Securities Industry Concerns Regarding Rule 2290
    • The SEC Approval of FINRA Rule 2290
    • Required Disclosures and Procedures Under Rule 2290
    • The Expected Impact of Rule 2290 on Investment Banks and on Fairness Opinion
    • Preparer Practices
    • Summary and Conclusion
  • CAN THE QUALITY OF FAIRNESS OPINIONS BE IMPROVED? 
    By Joel Johnson, ASA
    • Potential Conflicts of Interest
    • Valuation Methodologies
    • Conclusion
  • SAMPLE FAIRNESS OPINIONS
  • FAIRNESS OPINION CASES
  • SELECTIVE BIBLIOGRAPHY FOR ADDITIONAL READING