The independence test for fairness opinions

Fairness opinions are often treated as a big-company formality. They matter just as much for small and mid-sized businesses in an M&A transaction.

A fairness opinion is an independent assessment of whether the terms of a deal are fair from a financial point of view.

Every deal brings competing interests. Buyers, sellers, shareholders, and employees all sit in different positions, and each deserves a transparent view of the financial terms. A neutral, third-party evaluation provides exactly that. This is especially true if there is a potential conflict between insiders, controllers, and outside investors.

One caution from our work: many fairness opinions are written by the same advisor who arranged the transaction, with fees tied to closing. That structure can pull an opinion toward the outcome rather than the analysis. The value of a fairness opinion rests on the independence of the professional who signs it. When the advisor’s total fee earned on an engagement is made up of 90% based on the transaction closing and 10% fairness fees, their bias can negate the value of their role representing all independent parties.

The stakes are practical. When a party believes it was treated unfairly, litigation often follows. An independent opinion, prepared before the deal closes, helps prevent those disputes and holds up if litigation or disputes emerge. The cost of an independent opinion is negligible compared to the time and cost to management and boards of a protracted dispute.

At Business Consulting Group, we provide independent fairness opinions for transactions of every size. If a deal is worth doing, it is worth being able to show it was fair.