Mar 03, 2017 the supreme court of yukon recently issued its reasons for approving exxon mobils acquisition of interoil pdf, which closed on february 22, 2017. Although fairness opinions are not legally required, the courts have generally noted with approval when a fairness opinion has been obtained in a merger. The fairness opinion intends to give charles vogeles board of directors and public shareholders a neutral opinion and assure that the offered price per share is fair and reasonable from a financial. When to use fairness opinions in private transactions. The fairness opinion shall not be disclosed or referred to publicly or to anv other third party, other than as required by indian law in which case you would provide us a prior written intimation and take our prior written consent for it. For arriving at the fairness opinion set forth below, we have relied upon the following sources of information. The fairness opinion is included in linkedins merger proxy. This chapter chapter 26 in the art of capital restructuring. Jan 21, 2014 a fairness opinion can help demonstrate that fiduciary duty was executed in good faith and can reduce the chance of shareholder dispute resulting from the transaction. Fairness opinion board presentation state of michigan.
If properly done, a fairness opinion is a powerful method to protect boards of directors, trustees and other corporate fiduciaries collectively. Fairness opinions in the context of recent delaware chancery. Majority of fairness opinions are robust, offer useful advice. Our opinion adresses only the fairness, from a financial point of view.
Fairness opinions in the context of recent delaware. The fairness opinion is addressed to the board of directors of the companv solely for the purpose of providing them with an independent opinion on the fairness of the valuation as determined by the valuer and for the purpose of submission to the stock exchanees, national company law tribunal. Theres a bankruptcy, liquidation, restructuring scenario less common. Schedule 14a proxy statements and registration statements on form s4 merger prospectuses require the disclosure of the information required by item 1015b a summary of any such fairness opinion only if the fairness opinion is referenced in the merger proxy or prospectus. The opinion relates to the price offered by the buyer and the fairness of the terms to the companys shareholders. All such parties expressly disclaim any and all liability for, or based on or relating to any such information conta. The substance of a fairness opinion is the valuation work conducted by a financial adviser. Msel is proposing to merge emc limited, mcnally bharat engineering company limited and mc nally. The importance of fairness opinions in transactions mercer. Fairness opinion a fairness opinion is a statement by a financial advisor that the consideration or financial terms in a merger, acquisition, divestiture, securities or other transaction are fair, from a financial point of view, to a companys shareholders, or a limited group of shareholders i. There is a huge variation in the premium of the acquirers fairness opinion over the merger offer price. This fairness opinion ratifies the consideration being paid or received as.
The fairness opinion is intended solely for use by the board of directors of nobel biocare as part of its report to the shareholders in connection with the offer in compliance with the takeover board ordinance on public takeover offers this fairness opinion can be used for publication in connection with the public tender offer. Download pdf 2mb fairness opinion on the fair exchange ratio report in connection with the scheme of amalgamation and arrangement for proposed amalgamation of pioneer distilleries. Fairness opinions address the fairness of the purchase price in an anticipated transaction. The fairness opinion and accompanying analysis will allow boards of directors to fulfill their fiduciary duties, comply with the business judgment rule, and provide support if the transaction is challenged. In connection with this opinion, we have, among other things. The elements of a fairness opinion continued what the opinion doesnt say.
Fairness opinion for business valuation the dak group. Fairness opinion a valuation opinion important in mergers. Aug 22, 2016 a fairness opinion for each respective party to an moe will opine as to the fairness of the exchange ratio because moes largely entail stockforstock structures. Mar 28, 2017 majority of fairness opinions are robust, offer useful advice. The supreme court of yukon recently issued its reasons for approving exxon mobils acquisition of interoil pdf, which closed on february 22, 2017. The fairness opinion is subject to the scope limitations detailed hereinafter. Restructuring and recapitalization an independent financial adviser is often needed in situations where a company is undertaking a recapitalization or restructuring through a plan of arrangement. A fairness opinion is a professional evaluation by an investment bank or other third party as to whether the terms of a merger, acquisition, buyback, spinoff, or privatization are fair. Why do some target firms choose to seek a second fairness. A fairness opinion fo in a merger or an acquisition transaction is a report issued by an investment banker to certify the transaction price.
Vmsl will merge into idea, and consequent to the same, vil which is the holding company of vmsl. The common pairing of publiccompany comparables andor precedent transactions with dcf analyses, often supplemented by one or more additional methodologies, demonstrates that, in the vast majority of cases, fairness opinion advisors diligently consider multiple perspectives and relevant analyses, when available, in assessing the fairness of. A fairness opinion is typically presented to the board shortly after completion of the merger negotiations, but before the deal is finalized and announced to the public. On merger of vil into idea subsequent to merger of vmsl into idea, idea shall issue and allot to shareholders of vil equity shares of idea, such that the shareholders of vil will hold 50% of the equity share capital of the merged entity on a fully. Mergers and acquisitions, fairness opinions, target returns. Newblould j discussed the use of fairness opinions in royal host, noting that the purpose of a fairness opinion is a commercial one and that it is an opinion to be considered by the board of directors and the shareholders in a commercial context, rather than an expert report in the litigation context. A positive shareholder reaction to the merger premium conditioned by the presence of a fairness opinion would imply a certifying fairness opinion, while a negative. When and why should a board require an independent. Fairness opinion discussion materials prepared by evercore group, l. Sometimes fairness opinions also include mergers models and lbo models merger models are more common on deals where its more of a merger as. They offer protection for shareholders and can be imperative in hostile takeovers and distress sales. A fairness opinion can help demonstrate that fiduciary duty was executed in good faith and can reduce the chance of shareholder dispute resulting from the transaction.
The dak group provides an independent fairness opinion for business valuation. Our opinion does not address the relative merits of the merger. Concerns about conflicts of interest demand a fairness opinion. As the acquisition of esopassociated businesses becomes more popular among middle market pe firms, the understanding and use of fairness opinions is more critical. The analysis that supports the fairness opinion is. We have prepared the fairness opinion report on the basis of the following information provided to us.
Sep 05, 2012 although fairness opinions are not legally required, the courts have generally noted with approval when a fairness opinion has been obtained in a merger. Scope of work the scope of work for the fairness provider of the target bank would entail the fairness provider to evaluate the swap ratio jointly suggested by the valuers of the target bank and the acquirer. Fairness opinion insight 3 fairness opinion insight foreword a global push for greater oversight of corporate activity, particularly in light of the current financial crisis, is being replaced with a more tightly regulated system. In the absence of any marketbased indication that the offer price is adequate, the reliance on a weak fairness opinion is a relevant factor in evaluating the whole of the board process when that opinion provides the only equivalent of a market check. On completion of both the abovementioned proposed mergers under the scheme, the shareholders of vil will hold 50% shareholding proposed shareholding in idea merged entity. The target bank intends to merge with the acquirer and would like to obtain fairness opinion for the proposed merger 2. We have been engaged by the special committee of independent directors pursuant to an engagement letter dated june 14, 2005 the engagement letter to render a fairness opinion to the board of directors of the company in connection with the transaction. Theres a management buyout or takeprivate a pe firm acquires the company via a leveraged buyout and turns it private. Mar 21, 2011 this chapter chapter 26 in the art of capital restructuring. Explaining the benefits of an moe and why ultimately the transaction is deemed to be fair in the absence of a market premium can be challenging.
Ponder provides various financial services including merger and acquisitions services to the healthcare industry. The transaction entails a voluntary offer, with the exchange of savings shares for ordinary shares at a ratio of 1. Fairness opinions in mergers and acquisitions request pdf. Sample fairness opinion available from bvr business. For example, the median time between presentation of the fairness opinion and public announcement of the merger was just one day. They are typically issued when a public company is being sold, merged or divested of all or a substantial division of their business. Deals are expected to be subject to much closer scrutiny in the upcoming. For example, when a target board adopts a resolution approving a merger agree. The importance of fairness opinions in transactions the final aspect of many mergersale transactions is the fairness opinion. In that context, boards are increasingly mindful of demonstrating their duties of loyalty and care and maintaining the benefit of the business judgment rule. Fairness opinion discussion materials prepared by evercore.
Guidecap provides independent unbiased fairness opinions to assist boards of directors in determining whether a proposed transaction is fair. When and why should a board require an independent fairness opinion bdo usa, llp, a delaware limited liability partnership, is the u. The importance of fairness opinions in transactions. Special meeting of savings shareholders 17 december 2015 at. The auxilium board of directors has received the auxilium fairness opinions to the effect that, subject to the assumptions, limitations, qualifications and conditions set forth therein, as of the date of each such opinion, the merger consideration was fair, from a financial point of view, to the auxilium stockholders excluding endo and its affiliates. The fairness opinion serves as a basis to assess the financial adequacy of sempione retails offer. Members of the special committee of independent directors. When fairness opinions are used outside of mergers the. When evaluating a merger or acquisition proposal, boards frequently seek fairness opinions from their financial advisors. How variable is the premium observed in acquirers fairness opinions. Fairness opinion on the fair exchange ratio report. A fairness opinion is a report that evaluates the facts of a merger, acquisition, carve out, spinoff, buyback or another type of purchase and provides an opinion as to whether. Fairness opinions provided by investment banks advising on mergers and acquisitions have been criticized for being conflicted in aiding bankers further their goal of completing the deal as opposed. It basically states qatalysts belief that the deal is fair.
Fairness opinions in mergers and acquisitions anil k. With a fairness opinion a bank earns a much lower fee it might be in the hundreds of thousands for smaller deals up to the low millions for larger deals but it earns that fee with far less time and effort. We will receive a fee for our services pursuant to the engagement letter, which will. You have requested our opinion as to the fairness, from a financial point of view, to the holders of delhaize shares and delhzize adss of the exchange ratio provided for in the agreement. At the time, however, there was pending legislation that would have reduced the corporate tax rate. When fairness opinions are used outside of mergers the new.
In the absence of any marketbased indication that the offer price is adequate, the reliance on a weak fairness opinion is a relevant factor in evaluating the whole of the board process when that opinion provides the only equivalent of a. A fairness opinion can help the board or a special committee of the board determine whether a proposed transaction is fair to relevant stakeholders. Define the value that an independent fairness opinion provides. A fairness opinion is a report that evaluates the facts of a merger, acquisition, carve out, spinoff, buyback or another type of purchase and. A fairness opinion is a report that evaluates the facts of a merger, acquisition, carve out, spinoff, buyback or another type of purchase and provides an opinion as to whether or not the proposed stock price is fair to the selling or target company. When and why should a board require an independent fairness. A fairness opinion provides important information in a variety of financial transactions, such as. Fairness considerations for mergers of equals mercer capital.
Investment banking fairness opinions might also be issued when. The purpose of the fairness opinion is to provide selling shareholders with an objective thirdparty analysis of the deals fairness. A fairness opinion is provided by an independent financial advisor to the board of directors of selling companies in many transactions today, especially those with a significant number of minority shareholders. Accordingly, asl has appointed us to give a fairness opinion on report issued by sspa in connection with the proposed derncrgcr. Not an independent appraisal or valuation of the corporations assets not an opinion that the price is the best possible or even likely to be the best possible not an endorsement or a recommendation to vote in favor of the transaction not an indication of legality. Fairness opinions in mergers and acquisitions by steven. Creating shareholder value through mergers and acquisitions, baker and kiymaz eds. The longer opinion will typically state quite clearly what it is not. In the current environment, boards of directors, shareholders and officers of corporations have growing concerns about conflicts of interest or the appearance of such conflicts. Although the average premium is 20%, the standard deviation of the individual acquirerside fairness opinion valuation premiums is more than 50%.