Fairness Opinions

    The problem of conflicted fairness opinions by investment bankers on proposed mergers has its origins in the late 80s case of Smith v. Van Gorkom, by the Delaware Supreme Court.  CEOs to justify the price of an acquisition hire an investment bankers to write a fairness letter. The letter tells readers that the price is within a range of fairness.  The banker is selected to approval the deal and may even be paid a bonus if the deal closes.  The NASD has announced a rule making initiative on fairness opinions and the Secretary of the Commonwealth of Massachusetts launched an investigation of the fairness opinions in the Gillette acquisition.  There are reputable independent valuation experts, such as Mercer Capital (http://merceronvalue.com/mt/mt-tb.cgi/28), that will do fairness opinions for a set fee and without ties to any of the parties.  A new firm Pirie, Goldsmith & Associates with a stellar management and advisory board offers the service.  One wonders why the independent directors on boards of either the buying or the selling firm do not insist on the hiring of one of these independent valuation firms.