A Fairness Opinion is a report compiled by a qualified advisor or investment banker that assesses the fairness of the price offered during a financial transaction, whether it is an acquisition, merger or other type of capital sale. The opinion relates to the value of the company and may include an assessment of the offer price and the fairness of the terms of the transaction.
The Fairness Opinion is of great help in the strategic and decision-making process, as it improves communication between the parties and mitigates the risks that may arise from any financial investment transaction. Sometimes a fairness opinion also provides a line of defence in court in case a shareholder or some other stakeholder files a lawsuit against the company's directors - either for accepting or rejecting an investment offer.
In preparing a Fairness Opinion, investment advisers need to consider the price, the terms of the share transfer and the fair remuneration to be received relative to the market rate. In offering a Fairness Opinion, analysts seek to look at the terms of the deal from the perspective of the company's investors.
The importance of seeking a Fairness Opinion
Strategic and governance decisions are rightly always subject to careful evaluation by stakeholders.
It is therefore extremely important that directors are able to demonstrate the soundness of their decisions, ensuring transparency in order to avoid potential reputational damage or litigation (both at corporate and, in some cases, personal level).
The Fairness Opinion is considered a key element in the protection of directors, management and shareholders and has become a crucial tool for decision-making, as the terms of these transactions are usually analysed by the different groups or stakeholders directly concerned by the financial transaction. Furthermore, the Fairness Opinion helps boards of directors determine whether the proposed transaction is reasonable or fair to shareholders or other stakeholders, from a financial perspective. In addition, the directors' decisions, supported by an independent Fairness Opinion from an accredited and experienced advisor, fulfil the duties of due diligence established for them by the Civil Code.
For start-ups and small and medium-sized companies that need to resort to capital increases, producing a Fairness Opinion is an extremely important and delicate step. It offers potential professional lenders a document drawn up using parameters and language they are familiar with. It also offers a serious, objective and professional image of the company when it is faced with the possibility of a capital increase.
Given its many benefits, the use of Fairness Opinion in debt and equity transactions has become a requirement (or best practice) in many jurisdictions in Europe and worldwide. Fairness opinions are also increasingly used in complex multi-jurisdictional transactions, which require a thorough understanding of the legal and financial implications involved.
Valuations carried out by our team of experts
2meet2biz requires an independent Fairness Opinion on the business valuations of all potential clients. The valuation is carried out with excellence and integrity while respecting the professional ethics of all parties involved.
Our Advisory Team begins its analysis of the project with criteria such as economic sustainability, profitability, clarity of objectives, strategic value, degree of risk, consistency with the platform's aims, i.e. environmental sustainability, innovativeness, ethicality and social impact, and membership of sectors of greatest interest to network investors.
Subsequently, our Team Specialist assigns scores based on the analysis criteria and passes the project on to the Board, which verifies profitability and average IRR, the quality of the bidding team and the degree of scalability.
In conclusion, we would like to reiterate the importance of an independent Fairness Opinion to mitigate risks and conflicts of interest related to debt or equity transactions in companies of any size and at any stage of development. Good corporate governance practices and transparency always help to dispel investor scepticism and secure the company from potential litigation.