What Are The Benefits Of Fairness Opinions?

Posted on

If your company is considering a significant financial investment, then you will do your own due diligence to assess the viability of the project. However, you can also bring in valuation experts to provide a fairness opinion before you decide whether to proceed or not.

What are fairness opinions? Why should you organize one before you decide whether to go ahead with your plans?

What Is a Fairness Opinion?

A fairness opinion is an independent valuation of possible business investments. You hire a firm of experts to evaluate a potential project before you commit to it.

So, for example, you might hire a fairness opinion valuation firm to check out a merger, acquisition, buyout, or takeover. The firm evaluates the deal objectively from an investor-based viewpoint.

So, they will look at the deal's costs and value. They will make market comparisons to see how the deal matches up with similar types of activity.

Their report will give you a broader understanding of the pros and cons of the deal and whether you might have problems along the way. While this report won't be the sole basis of your decision-making, it will influence it.

What Are the Benefits of Fairness Opinion Valuations?

A fairness opinion gives you a different perspective on a potential business investment. It adds to the research you've already done.

In some cases, your report will back up your own findings. You can proceed with more confidence because the report concludes that the deal is a fair one.

However, sometimes, the report might make you decide not to go ahead with the deal or to renegotiate its terms. If the report tells you that the deal doesn't have the value you think it does, or that it has some problems you were unaware of, then you might want to change your plans.

Here, the report could help you avoid making a costly mistake. The more information you have, the better able you are to make a sound business decision.

Plus, a fairness opinion gives you some useful backup with your shareholders and stakeholders. If they aren't sure about the project, then they might not back it based on your opinion and plans.

If you get an independent valuation from a qualified firm, then you back your case. You show your shareholders and stakeholders that the project is viable. They get independent verification rather than just your opinion and research. You're more likely to get buy-in.

To learn more about how this process works and its benefits, contact a fairness opinion valuation firm such as Marshall & Stevens.