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FAIRNESS OPINIONS
A fairness opinion is a financial advisor's opinion and an independent objective analysis, from a financial point of view, as to the fairness of the financial terms of a corporate transaction. There are many reasons for fairness opinions, most of which deal with transactions involving securities of closely-held and publicly-traded companies. An independent opinion of fairness relative to the exchange of values can provide substantial support for such exchanges. Furthermore, independent fairness opinions are useful as a defense against dissident shareholder claims.
Parties who utilize fairness opinions will generally agree on the definition of a fairness opinion. However, disagreements may arise as to what a fairness opinion is not. A fairness opinion is not:
- A valuation analysis of a target company
- An evaluation of the business rationale to proceed with the proposed transaction
- An opinion as to the legal fairness of the proposed transaction
- A recommendation that the board of directors or controlling shareholder of the target company vote to approve the proposed transaction
Houlihan has substantial expertise in the private equity and public company arena and can assess and resolve fairness issues working closely with company advisors. Houlihan has provided fairness opinions to some of the largest NYSE companies as well as for complex private equity transactions. Extensive due diligence is required and will typically include, among other things:
- Interviewing key management and key company professional advisors
- Visiting major company facilities
- Analyzing historical financial statements
- Reviewing transaction documents
- Researching industry information
- Applying certain valuation standards
Several different factors in deals involving both public and private companies can trigger the need for a fairness opinion. Houlihan is experienced with virtually every conceivable change of control situation and has provided fairness and valuation opinions for the following:
- Stock and Asset Acquisitions
- Going Private Transactions
- Type A, B and C Reorganizations
- LBO Transactions
- Squeeze-out Mergers
- Management Buyouts
- Sale Transactions without competing offers
- Affiliate and Insider Transactions
- Private Equity and Venture Capital firms: Investment into a portfolio company by a subsequent fund with different LP's
- Backstop Fairness Opinions / Second opinions (where lead investment bank is conflicted)
- Private Placements
- Conversion from Non-Profit to For-Profit Status
- PIPE transactions (Private Investment in Public Equity)
- Special Purpose Acquisition Corporation ("SPAC") Transactions
- Reverse Mergers
- Bankruptcy Emergence Related Transactions
- Employee Stock Ownership Plan ("ESOP") Transactions
The Houlihan name is synonymous with independence and valuation expertise. Please contact Andrew Smith, president, to confidentially discuss potential fairness transactions.