The purpose of a "fairness" opinion from an investment bank is
A) To evaluate for the target's board of directors the appropriateness of a takeover offer
B) To satisfy Securities and Exchange Commission filing requirements
C) To support the buyer's negotiation effort
D) To assist acquiring management in the evaluation of takeover targets
E) A and B

Question

Quizplus · Accepted Answer

A fairness opinion is typically provided by an investment bank to the board of directors of the target company to evaluate the appropriateness of a takeover offer. It is meant to provide an independent assessment of whether the offer is fair to the target's shareholders from a financial point of view. While it may also be used to satisfy regulatory requirements, its primary purpose is to provide guidance to the board of the target company in their decision-making process. The other choices may be secondary reasons for obtaining a fairness opinion, but they are not its primary purpose.

The Purpose of a "Fairness" Opinion from an Investment Bank