Fairness opinions are a long-established fixture of the public
M&A deal process. Smith v. Van Gorkum, the landmark
case in Delaware corporate law that sparked the proliferation of
fairness opinions, requires that a board of directors receive
"adequate information regarding the intrinsic value of the
[c]ompany" in a change of control transaction. Therefore, before
the board of a public company target approves a sale of the
company, the board will receive a fairness opinion from an
investment bank or other financial advisor stating that the sale
price is fair from a financial point of view to the shareholders.
However, although customary, fairness opinions have detractors
among both M&A commentators and practitioners. These detractors
deride fairness opinions as rubber stamps undermined by alleged
conflicts of interest stemming from the way financial advisor
compensation is structured and a surreptitious desire to gain the
favor of a buyer that may be a once and future client. In an
infamous allusion to the Peanuts comics strip during a 2007 hearing
before the Delaware Court of Chancery, fairness opinion providers
have been compared to "the Lucy sitting in the box: 'Fairness
Opinions, 5 cents.'"
Read the article here.