Glossary
Deal economics
What is fairness opinion?
A bank's opinion that a price is fair, financially, to a company's holders.
Narrow by design: it doesn't say the price is the best available. Its value depends on the bank's independence and how it is paid.
A worked example
A board agrees to sell at $42 a share. The bank's DCF, comparables and precedents give a combined range of $36 to $45, so it can opine that $42 is fair, from a financial point of view, to shareholders.
Where it catches you in the game
- Conflicts scenarios ask whether to give one, and what to disclose.
It comes up most on the investment banking desk.
Related terms
Learn it by using it
Definitions stick once they've cost you money. Take a seat, make three calls a year and watch what fairness opinion does to your returns.