Fairness Opinions

Valuation, Financing, Transaction, Merger, Acquisition, Divestiture, Fairness Opinion, Corporate Finance, Financial Advisor

Independent Board of Directors of publicly traded companies typically seek a Fairness Opinion in the following situations:

Related Party Transaction proposed by an insider of a publicly traded company.
Going Private Transaction for a publicly traded company proposed by an insider and/or a private equity investor.
Take-Over/Merger Transaction of a publicly traded company proposed by another publicly traded company.
Sale of Material Assets of a publicly traded company.

Independent Board of Directors seek independent assurance that a proposed transaction is objectively reasonable, from a financial point of view, to a specific party that would be impacted by the proposed transaction. This need may arise from a fiduciary obligation and/or to further reinforce informed business judgment. Acting with informed business judgment is a central issue in defending litigation against board of directors exercising their fiduciary responsibilities.

A Fairness Opinion is a statement by a qualified financial advisor that, from a financial point of view, the consideration or the financial terms between specific parties, are fair to a specific party. A Fairness Opinion is not assurance that the best price is being received for a proposed transaction. It is a conclusion that the consideration exchanged in the proposed transaction is within a range that the parties to the transaction would reasonably be expected to agree.

On July 27, 2017, the securities regulatory authorities in each of Ontario, Québec, Alberta, Manitoba and New Brunswick published a Staff Notice (click here to access) to advise market participants of their current and proposed review and oversight of transactions that are subject to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions. The Staff Notice also included commentary regarding Fairness Opinions as follows: In reviewing material conflict of interest transactions Staff found that disclosure concerning fairness opinions was often limited and did not provide security holders with a meaningful understanding of the fairness opinion and how it was considered by the board or special committee. Where a fairness opinion is obtained for a material conflict of interest transaction, the disclosure document should:

disclose the compensation arrangement, including whether the financial advisor is being paid a flat fee, a fee contingent on delivery of the final opinion, or a fee contingent on the successful completion of the transaction
explain how the board or special committee took into account the compensation arrangement with the financial advisor when considering the advice provided
disclose any other relationship or arrangement between the financial advisor and the issuer or an interested party that may be relevant to a perception of lack of independence in respect of the advice received or opinion provided
provide a clear summary of the methodology, information and analysis (including, as applicable, financial metrics, and not merely a narrative description) underlying the opinion sufficient to enable a reader to understand the basis for the opinion, without overwhelming security holders with too much information
explain the relevance of the fairness opinion to the board of directors and special committee in coming to the determination to recommend the transaction.

The Staff Notice commented that Standard No. 510 of The Canadian Institute of Chartered Business Valuators ("CICBV") has established an appropriate standard for fairness opinions. Quantum Advisory prepares its fairness opinions to meet the standards established by the CICBV.

Quantum Advisory's experience in providing Fairness Opinions is available as follows:

Click here to access tombstones of Fairness Opinions previously rendered by Quantum Advisory.

Click here to access a Fairness Opinion that Quantum Advisory provided to the Board of Directors of SpruceLand Properties Inc. on January 22, 2016 for a material transaction that involved the sale of 24 real estate properties for aggregate proceeds of $106.9 million and the subsequent windup of the company.

Click here to access a Fairness Opinion that Quantum Advisory provided to the Board of Directors of ESTec Systems Corp. on November 4, 2016 in connection with a going private transaction and subsequent delisting from the TSX Venture Exchange.

Click here for a PDF Version of our firm's experience for Fairness Opinion purposes.