Fairness Opinion
Definition
A fairness opinion is a letter from an investment bank to a company's board of directors stating that the consideration in a proposed transaction is fair, from a financial point of view, to the relevant shareholders. It is supported by a valuation analysis — typically comparable companies, precedent transactions, and a DCF — summarized for the board.
Boards obtain fairness opinions to help satisfy their fiduciary duties and to create a record of an informed decision, which matters in shareholder litigation. The opinion addresses financial fairness only; it is not a recommendation on how to vote, and it does not opine on whether the deal is the best available.
Fairness opinions are common in public M&A, squeeze-outs, and conflicted transactions. Critics note the conflict when the advising bank's fee is contingent on closing, which is why boards sometimes hire a separate, independent bank solely for the opinion.
Why interviewers ask
Interviewers (especially in M&A groups) ask what a fairness opinion is, who it is addressed to (the board, not shareholders), and what analyses back it up. It is also a natural bridge question into "walk me through the main valuation methodologies."
Related terms
Interviews don't test definitions — they test recall under pressure.
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