Fairness Opinion
An independent investment bank assessment of whether the financial terms of a merger or acquisition are fair to shareholders.
What is Fairness Opinion?
A fairness opinion is a written assessment prepared by an independent financial advisor—typically an investment bank—evaluating whether the consideration to be received by shareholders in a proposed merger, acquisition, or other significant transaction is fair from a financial point of view. The opinion is addressed to the board of directors and supports the board's fiduciary duty to act in shareholders' best interests when approving a transaction. The advisor's analysis typically includes a discounted cash flow (DCF) valuation, comparable company analysis, precedent transaction analysis, and a review of the target's financial projections. The fairness opinion and the underlying analyses are disclosed in the proxy statement or Schedule 14D-9 filed with the SEC before the shareholder vote.
Example
In connection with Microsoft's January 2022 announcement of its $95.00 per share cash acquisition of Activision Blizzard, Inc., the Activision Blizzard board engaged Goldman Sachs & Co. LLC and Allen & Company LLC to provide independent fairness opinions. Both advisors concluded that the $95.00 per share consideration was fair to Activision Blizzard's stockholders from a financial point of view. The full analyses supporting the opinions, including DCF and precedent transaction methodologies, were disclosed in Activision's Schedule 14D-9 filed with the SEC.