Fairness Opinion Consultants

Fairness Opinion Consultants

Enterslice’s fairness opinion consultants offer best-in-class fairness opinion estimation services to boards of directors, special committees, and other fiduciaries in connection with mergers, acquisitions, divestitures, and other material transactions. By analyzing the financial facets of a transaction, we help our clients achieve their fiduciary duties and make improved investment choices. Our consultants can deliver an independent fairness opinion as to whether the amount to be paid or received in a deal is fair from an economic point of view. We use various fairness opinion calculation approaches, and our consultants have hands-on experience working on the valuation of businesses of different domains. Hence, Enterslice is a stop solution for all your valuation service requirements.

What is Fairness Opinion?

A fairness opinion is a report assembled by a qualified investment banker or consultant that evaluates the fairness of the value offered during a merger, procurement, or takeover. The opinion relates to the price accessible by the buyer and the fairness of the standings of the company’s shareholders. It is used equally in both friendly and hostile dealings. During a friendly deal, the estimation is typically in the goodwill of the transaction, but during a hostile overthrow or unsolicited tender to acquire all or fragment of a business, the directors often try to persuade shareholders not to accept the offer with an insufficient opinion. In the fairness opinion, the investment consultants must look at the price, the standings of the sale, and the deliberation to be received vis-à-vis the marketplace rate for the same transactions when reviewing the transaction. 

Importance of Fairness Opinion

Accountability

The directors of a business have fiduciary accountability to stakeholders, which is known as the ‘business judgment rule’. The rule necessitates that the management must characterize the shareholders in moral faith, like a reasonable person who is accountable for supervising the dealings of a business.

Stakeholder Interest

The fairness opinion intends to demonstrate to the stakeholders that the administration or managers acted in the shareholders' finest interest and that an analysis by an independent consultant hired by the business confirms whether the standings were fair or not if the offer is being banned.

Confidence

Some stakeholders may seek info as to whether there were other substitutes to the deal, how the business deal could’ve achieved better standings, etc. An opinion arranged by a qualified advisor can help reduce such concerns by confirming that the price is a fair valuation.

Enterslice’s Fairness Opinion Support Services

Merger Support

Fairness opinions are commonly taken into account during the procedure of any merger about to happen. A fairness opinion report completed with the help of Enterslice’s fairness opinion consultants will help in getting to know the current financial standing of a business.

Acquisition Support

Enterslice provides expert elucidations and support for the process of company acquisition. A fairness opinion report made by our fairness opinion consultants will help the acquirer and company that is being acquired understand their financial well-being and omit the chances of any conflict of interest.

Takeover Support

The person who is taking over a particular company needs to know the exact fair value of the company in question. A fairness opinion consultant comes in handy during situations like this. Enterslice's fairness opinion consultants will take all the measures and correct steps to conduct research and inspection to come up with a true fairness opinion report.

Conflict Support

When it comes to financial investments or any business transaction, it is important to approach it with a sense of fairness. The fairness opinion report prepared by Enterslice's fairness opinion consultants will help a person understand and resolve any conflict transaction issues. 

Process of Fairness Opinion Valuation

The valuation process for mergers and acquisitions involves determining the fair market value of a company or business unit to be acquired or merged. The process typically involves a comprehensive analysis of various factors, including economic performance, market circumstances, industry tendencies, and possible risks and reservations. Here are the key steps involved in the valuation process:

Objective and Target

The purpose of the evaluation will influence the approach to be taken for the investigation. For example, the purpose may be to regulate a fair price to pay for procurement or to establish a company’s overall value for future calculated planning purposes. The target business is the entity being merged or acquired. That comprises identifying the company’s assets, operations, and liabilities.

Data Collection and Assessment

The next step is to gather data on the target company, including financial declarations, projections, client information, market statistics, and other appropriate information. The analysis encompasses reviewing the collected data and evaluating the target company's financial presentation, market situation, competitive background, management line-up, and potential risks and hesitations of the operations and projections of the business.

Selection and Application

There are several methods for valuing a company, like discounted cash flow analysis, comparable company analysis, precedent transaction breakdown, and asset-based estimate. Once a valuation procedure is selected, it is practised on the target company’s financial data to establish its fair value.

Evaluate and Develop a Valuation Report

The outcomes of the valuation are assessed to ensure they are sensible and in line with the industry standards and limitations. Any alterations may be made based on additional analysis and discussion with investors. A valuation analysis report is prepared that records the analysis, procedure, and deductions of the valuation process. The report is characteristically used to facilitate management by stakeholders, such as stakeholders, managers, and potential stockholders.  

Point to Remember for Fairness Opinion Valuation

Acquiring Statistics

When forging a fairness opinion, independent consultants must practice due diligence to guarantee that all the necessary statistics required to reach a deduction have been acquired. They achieve this by going to the business locations of the selling business and studying Paper works that will help in developing an estimation of the value of the selling business. They should inspect the dividend-paying past and capacity of the business, past financial well-being, factors influencing revenues, and the considerations for comparable dealings. The advisors should also analyze the merger or procurement agreement and its inclusions.

Statistics by Purchaser

The due diligence must not be stuck to the selling business alone. The advisors must perform a similar implementation in regard to the buying business. If the purchaser is a publicly traded business, the advisors must review their financial reports, past achievements and unions, and any recent public admission necessary papers. The advisors must also reach out to other consultants who have dealt with the business to get the necessary evidence that may be material to the deal.

Fairness Analysis Aspects

Once the advisors have accomplished the review and accumulated a report on their opinion, the report is advanced to the directors for deliberation. The management negotiations of each factor specified in the fairness analysis report are abridged in a fairness memorandum. The advisors may participate in these negotiations and respond to any disquiets or questions that the administration may have concerning the analysis.

Areas of Concern in Fairness Opinion Analysis

These are certain concerns that come in the preparation of a fair opinion analysis report. The first alarming concern is the cost indicated for the service by investment consultants. Since the report is organized while negotiations among the buyer and the vendor are ongoing, the consultants are under a considerable time burden to complete the fairness opinion analysis. Also, the preparation necessitates a high level of skill to recognize any areas in the agreement that need the attention of the investors. The advisors or the valuation consultants have to take a lot of time to meticulously calculate and organize a report. The report may be utilized in a court of law, and thus, the analyst must deliver a high degree of precision and attention to aspects. Another concern regarding fairness may arise when the work of preparing the report is assigned to an investment bank that is also involved in the acquisition transaction. Some critics say that the investment bank will be entangled in a conflict of interest since it receives payments from the opinion fee work as well as from facilitating the sale of the business.

Need for Fairness Opinion

• Fairness Opinions are an influential risk management procedure or tool. Attorneys, accountants, advisors, and other consultants must stress the importance of fairness estimation as a protection against stakeholder dissension.
• Predominantly, in change-of-control dealings, a fairness opinion increases the likelihood that the business judgment rule will safeguard the directors' conclusion. An independent fairness opinion may also help to inspire shareholders to favour the proposed deal.
• Public v. Private Public businesses traditionally received the greatest benefit from fairness estimations. There is often a diverse group of stakeholders, posing the risk of class action suits, as well as numerous outside directors aware of their custodian responsibilities.
• Increasingly, nevertheless, owners and directors of private businesses also seek fairness estimations in the course of important transactions. Private companies regularly have complex investment structures and dissimilar classes of ownership.
• Such diversity of interests puts a limelight on any family ownership issues amid large numbers of stakeholders. Any uncooperative minority investor group poses a risk to the accomplishment of a transaction.
• The value of a fair estimation from an independent financial consultant is particularly clear to the Board of Managers of a private business. Boards of Directors of private businesses often have little, if any, outside exemplification.
• A fair opinion report made with the help of an independent consultant introduces an objective standpoint that is free of conflicts of importance. Buyers vs. Sellers, both the buyer and the vendor in a transaction advantage from a fairness opinion, particularly if shareholder approval is compulsory.
• Selling companies would secure fairness estimations early in the process in order to permit sufficient time for greater bids to be presented by external parties.

Benefits of Fairness Opinion

Many businesses identify the significance of obtaining a fair opinion during bitter takeovers. But it is equally significant to get a fair opinion during a friendly takeover, too. One of the key benefits of getting a fair opinion is that it enhances decision-making, and businesses attain useful insights that may otherwise be overlooked during the procedure. An independent fairness opinion can also help in getting extra protection for situations like when a stakeholder may file a lawsuit if they are not satisfied with a contract or a deal. A fair opinion will also help in presenting to both internal and external stakeholders that the members of the board are practising care and prudence while analyzing a transaction.   

Evolution of Fairness Opinion

It has been observed in the last 36+ years that fairness opinions always come with a significant amount of controversies. Concerns related to the quality and the regularity of the fairness opinion as well as the provider are a part of discussion in the industry. Mandatory activities while conducting the fairness analysis, subjectivity in the fairness report, and conflict of interest, if any, are some of the important aspects that need to be checked while making a fairness opinion report. It is observed that more than half of the M&A deals are challenged by the other party because of improper transparency in the process. Hence, it is important to select a service provider whose opinion can withstand the upcoming scrutiny.

Valuation Methods for Fairness Opinion

Asset-Based Valuation

This approach includes valuing a company based on its possessions, such as real estate, catalogues, and tools. This method can be useful for businesses with significant palpable assets but may not capture the full worth of intangible assets such as brand equity or intellectual property. The asset-based valuation method computes the business’s net possessions by removing the liabilities from the possessions. This method is generally modified to compute a business's net asset value with respect to the market value of its possessions and liabilities.

Market-Based Valuation

This approach comprises market analysis to establish the value of a company. It can involve looking at the market worth of comparable businesses, recent transactions in similar industries, and other applicable economic factors. This method is popularly used to calculate the value of an asset. The method is utilized in instances where a profuse amount of information is available on transactions that are comparable regarding recent sales activity. It is one of the most widely used methods to calculate fairness opinions.

Income Based Valuation

This method involves computing the value of a company based on its predictable future income. This can be done through a discounted cash flow study, where future cash flows are predictable and then discounted to their current value using a discount proportion. This method contains a set of methods utilized to determine the worth of a business, investment, or asset with respect to its capability to produce revenue. It is widely used for significant business transactions like M&A, equity valuation, and analysis of investments.

Types of M&A where Fairness Opinion is Required

Conglomerate

A conglomerate is a kind of corporation built up of many different and independent companies or businesses. In this kind of corporation, one company supervises the stakes of a smaller business, where each does business operations differently and separately. When a conglomerate is formed through the means of M&A, a fairness opinion report is required to be made and submitted. The fairness opinion report will let the parent company know about the aspect of business in the company they’re about to acquire.  

Horizontal Integration

Horizontal integration is a type of strategy where a particular business increases its operations at a similar level in the industry. Horizontal integration aids businesses in growing their dimensions and income. The process also lets a business expand into newer and unexplored markets by diversifying its products and reducing competition. When this is achieved by means of M&A, a fairness opinion report is required to be made to make the buying company aware of the other company’s aspects.

Vertical Integration

Vertical integration is a type of strategy that lets the parent company have direct access to the distributors, suppliers, or retail locations so that they can have better control over the supply chain. This process lets a company enhance its efficiency, reduce costs, and control the manufacturing process in a better way. When such an acquisition is made through M&A, a fairness opinion report is required to be made. It makes the company aware of the supply line efficiently.

Enterslice’s Services for Fairness Opinion

Recapitalization

Recapitalization is the procedure of reanalyzing and rearranging a company’s debt and equity ratio. The resolution of recapitalizations is to stabilize a business’s capital arrangement. Fairness opinion lets the stakeholders understand the asset’s true value more efficiently.

ESOP Valuation

ESOP or Employee Stock Ownership Program is an employee benefitting attribute that allows workers to acquire stocks of the business at an agreed value. Therefore, the fairness opinion valuation can be used to guarantee the price.

Related Party Transaction

In deals like this, the transaction is among two parties who have similar interests, or they are familiar with one another. As a result, the fairness opinion evaluation should be commenced in such a deal to determine the fair value.

Diverse Ownership

When the deal is being made, it is important to ensure that the transaction is fair and is in the interest of all parties. Fairness opinion valuation in this considered is an essential tool wherein the stakeholders can be provided with a fair value of the transaction.

Other Aspects of Enterslice’s Fairness Opinion Analysis Services

Negotiation

A fairness opinion report supports negotiations between the two parties by producing a similar or equal starting point for negotiation and discussions on transactions.

Price Justification

A fairness opinion report lets the purchaser justify the paid price to the stakeholders, as it demonstrates the fair price.

Securing Finance

A fairness opinion report aids the process of securing financial benefits in a transaction when the buyer conducts an independent fair value analysis.

Credibility Report

The process of calculating fair value enhances the credibility of the dealings or transactions by delivering an independent assessment to the stakeholders.

Enterslice’s Success Chronicles

Enterslice is well known for its customer-centric services. Client satisfaction has always been our number one priority. With 10000+ happy customers and 200+ successful valuation processes done by our valuation experts, Enterslice prides itself on being a one-stop solution for all your business needs. With 50+ offices in different regions and a team of 50000+ lawyers and CA, we deliver high-quality deliverables every time.

Triple ‘E’ Success Factors of Fairness Opinion Service

Expertise 

Our expert valuers are well-versed with the current trends in the valuation processes. They make sure they are updated with the latest tech and tools used in the process. Our valuation experts have a proven track record of providing best-in-class services wherever required.  

Experience 

Our valuation experts have hands-on experience in providing valuation services to 200+ businesses of different scales and domains. They use a variety of valuation techniques suitable for the type of assets they are valuing.  

Excellence 

Our valuation experts provide personalized services as per the business's concerns. They make sure that every detail has been meticulously calculated without leaving any scope for error. With tailor-made packages, every requirement is met accordingly.

Advantages of Hiring Enterslice Fairness Opinion Experts

Fairness opinion plays an essential role in economic dealings and may be utilized to aid the management or executives. A Fairness Opinion delivers the management team with a lot of figures about the transaction and its fairness. It further provides a thorough analysis of the deal from the financial viewpoint, which is vital in assessing the worth of the deal. It can help preclude disputes between the parties involved in a transaction. Usually, businesses have a number of substitutes that they consider before selecting the deal. They associate them based on their different characteristics and try to identify which is the best choice possible. In order to get this process done, it is vital to approach the deal in an unbiased and fair manner.

Risks of not hiring a Fairness Opinion Expert

A fairness opinion consultant has hands-on experience in preparing fairness opinion reports for companies in different domains. They add major benefits to the process of creating a fair opinion report. There are many risks of not hiring a fairness opinion consultant, like during M&A, where an unbiased fairness opinion report is required to earn the trust of the stakeholders. When the fair value report is made by an insider, it can lead to several conflicts of interest between the stakeholders, which may further lead to legal disputes. The kind of analysis done by an individual who makes fairness opinion reports on a daily basis or on a full-time basis will be more efficient than the report made by a newcomer.