Wednesday, April 20, 2011
Steven Davidoff, et al's chapter on Fairness Opinions in M&A is now appearing in THE ART OF CAPITAL RESTRUCTURING: CREATING SHAREHOLDER VALUE THROUGH MERGERS AND ACQUISITIONS. If you're interested in fairness opinions, and let's be honest - who isn't?, then this an excellent place to start.
Abstract: When evaluating a merger or acquisition proposal, boards frequently seek fairness opinions from their financial advisors. This fairness opinion ratifies the consideration being paid or received as "fair from a financial point of view" to shareholders. This chapter describes how a Delaware Supreme Court ruling and Delaware corporate law combined to institutionalize fairness opinions and how the form and content of a fairness opinion results from concerns over limiting the liability associated with delivering the opinion. It then surveys the limited finance literature that examines whether fairness opinions provide value to shareholders or serve the interests of the board and management at the expense of shareholders. It also highlights the difficulties associated with conducting such empirical tests because of the way fairness opinions are sought and provided. It concludes with some conjectures about the potential value of fairness opinions, and raises questions for future research.