Second Fairness Opinions
Fairness opinions are offered by financial advisors, primarily, investment bankers on behalf of the Board of Directors who rely on them when considering a significant corporate event. The fairness opinion says that the impending transaction is fair from a financial point of view of the subject companyâ€™s stakeholders. As Jeff K. Davis, Managing Director of Mercer Capitalâ€™s Financial Institutions Group, explains, because most of the investment bankerâ€™s fee is contingent upon the successful closing of a transaction, the lead bankerâ€™s opinion has always had some taint. In 2007, the Financial Industry Regulatory Authority (â€śFINRAâ€ť) issued Rule 2290, which requires the issuer of a fairness opinion to disclose such conflicts.
This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit http://mercercapital.com/category/financialreportingblog/.