Does Your Company Need a Fairness Opinion?

Greenstein, Rogoff, Olsen & Co
Posted: 3/31/11

Although not required by statute or regulation, fairness opinions have become an important component of the board of directors and executives deliberation process as they seek to satisfy their fiduciary duties to shareholders and act with due care in an informed manner. Fairness opinions are prepared for and delivered to a company’s board of directors or executive. They express an opinion as to the fairness of the consideration to be paid or received in the proposed transaction or of the exchange ratio in the case of stock-for-stock transactions.

Fairness Opinions are commonly issued in connection with mergers, acquisitions and change of control transactions. In addition, it is highly recommended to obtain a fairness opinion when you conduct corporate restructurings, enter into related party transactions, receive tender offer, and negotiate loan covenants; however, fairness opinions do not constitute recommendations to shareholders or related parties as to how they should vote on a proposed transaction, evaluate the business rationale to proceed with the proposed transaction, or whether they should take any other actions.

The common deliverable of a fairness opinion is a brief document, normally in a letter format; nonetheless, the supporting work behind the fairness opinion letter can be substantial. This supporting work is incorporated in the fairness opinion along with all material factors, conditions, circumstances, and other considerations which were analyzed, assessed, and disclosed in the development of the opinion. The scope of fairness opinion is limited to the financial terms of the transaction and the opinion is based upon the information provided by the subject company and relevant publicly available information as of the fairness opinion engagement date; moreover, valuation analysts rely on the accuracy and completeness of all such information.

How Greenstein Roggoff Olsen & Company Can Help You

Greenstein Rogoff Olsen & Company (GROCO) is a full-service certified public accounting firm, advising and assisting our clients with their accounting, tax, wealth preservation and business valuation needs.

GROCO Business Valuation Analysts have the qualification and resources to provide fairness opinions that satisfy the fiduciary and due diligence responsibility rest upon the Board of Directors and Executives. The dedicated Business Valuation group at GROCO provides the expertise of a large big four firm with the hands on individualized service of a small local firm with regional prices. We are committed to provide our clients and their advisors with the highest services and support available. Our business valuation analysts are certified as accredited valuation analyst from the National Associate of Certified Valuation Analysts and have work experience with the big four accounting firms.

Our business valuations group has preformed hundreds of valuations of privately held corporations and businesses totaling over $3 Billion in appraised values. This experience has spread over sixty-five different industries all geographical regions of the US and all stages of enterprise development, with particular emphasis on early stage companies in the Silicon Valley.

For more information, contact Alan Olsen, Managing Partner, at aolsen@groco.com.