{"id":561092,"date":"2012-06-27T04:03:28","date_gmt":"2012-06-27T08:03:28","guid":{"rendered":"https:\/\/vrbbd.wpengine.com\/vrbbmadison\/selling-do-you-need-fairness-opinion\/"},"modified":"2022-01-31T12:44:38","modified_gmt":"2022-01-31T17:44:38","slug":"selling-do-you-need-fairness-opinion","status":"publish","type":"post","link":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/selling-do-you-need-fairness-opinion\/","title":{"rendered":"Selling: Do You Need a Fairness Opinion?"},"content":{"rendered":"<div>\n<p>Much has been written about \u201cfairness opinions\u201d due to the financial manipulations among companies such as Enron, Tyco and others.\u00a0 The conflict in the use of fairness opinions\u00a0 was (and is) that an investment banking firm not only handled the sale of a company,\u00a0 but also got paid for doing a fairness opinion.\u00a0 For example, when the Bank of America decided to buy Boston\u2019s Fleet bank, B of A paid the investment banking firm of Goldman Sachs $3 million as a retainer, $5 million for a fairness opinion, and was prepared to pay a success fee of $17 million if the deal actually was completed.<\/p>\n<p>Keep in mind that a fairness opinion is prepared by one or more financial experts, or by a firm, to protect the shareholders; in other words, to assess whether or not the deal is fair to the real owners of the business.\u00a0 It also protects the officers and board of directors from shareholders who feel that their company is paying too much for the business being acquired.\u00a0 It is also apparent, from the example above, that the investment banking firm makes money, and a lot of money, through the entire purchase from beginning to end.\u00a0 They don\u2019t have much of an incentive to really come in with a \u201cfair\u201d fairness opinion.\u00a0 However, regulators are looking at this obvious conflict of interest very seriously, and changes in the current regulations are almost sure to happen with full disclosure being only the first step.<\/p>\n<p>So, how does all of this impact the privately held company?\u00a0 It is vital that an owner of a privately held company who has minority or family shareholders should also seek a fairness opinion.\u00a0 It may not have to be done by an investment banking firm and probably shouldn\u2019t be prepared by the owner\u2019s accounting firm, for the same reasons outlined above.\u00a0 A third party evaluation should be done to insure that a minority owner doesn\u2019t come out of the woodwork and claim that the business was sold for much less than it is worth \u2013 at least according to the dissident shareholder.<\/p>\n<p>A professional intermediary can be an excellent resource in the preparation of a fairness opinion for the privately held company.\u00a0 They can provide several valuation professionals and\/or firms and also assist in the gathering of the necessary financial records.\u00a0 Generally speaking, a fairness opinion is prepared after the selling price is agreed upon.\u00a0 In the sale of a privately held company, the price may fluctuate throughout the negotiations, but a third party valuation can set the bar.\u00a0 And, it\u2019s very possible that using a business intermediary to market the business will bring a price above the valuation, pleasing everyone.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Much has been written about \u201cfairness opinions\u201d due to the financial manipulations among companies such as Enron, Tyco and others.\u00a0 The conflict in the use of fairness opinions\u00a0 was (and is) that an investment banking firm not only handled the sale of a company,\u00a0 but also got paid for doing a fairness opinion.\u00a0 For example, [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-561092","post","type-post","status-publish","format-standard","hentry","category-selling-a-business"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/posts\/561092","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/comments?post=561092"}],"version-history":[{"count":0,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/posts\/561092\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/media?parent=561092"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/categories?post=561092"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vrbusinessbrokers.com\/vrbbmadison\/wp-json\/wp\/v2\/tags?post=561092"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}