Before a supervisory board or shareholder group approves a transaction, the same question often arises: is the negotiated price financially adequate? The fairness opinion answers it, an independent assessment confirming or questioning the adequacy of the consideration. In the large listed world it is standard. In the mid-market the question is rightly when the effort actually pays off.
What a fairness opinion is and is not
A fairness opinion is an expert statement by an independent professional on the financial adequacy of the purchase price. It states whether the offered price falls within a plausible range derived from accepted valuation methods. It is explicitly not an investment recommendation nor a guarantee that the price is the best possible. It answers the narrow question: is this consideration fair, measured against the value of the company?
Methodologically it relies on the same techniques underlying any sound company valuation. As a rule a multiples approach based on comparable transactions is combined with an income-based method, as detailed in our article on company valuation with multiples and DCF.
The methodological basis: multiples and DCF
The expert typically works on two tracks. Through multiples the company is measured against comparable market transactions, for example enterprise value to EBITDA. In parallel the DCF method provides a fundamental-value anchor by discounting future cash flows.
Only the combination of both yields the range against which the negotiated price is mirrored. If the price lies within this range it is deemed fair. If outside, the expert must justify why, for instance strategic premiums or synergies. A serious fairness opinion makes its assumptions transparent and is robust to sensitivities.
When it pays off in the mid-market
Not every transaction needs a fairness opinion. In an owner-managed sale where the sole shareholder decides alone, the added value is limited. It becomes useful where decision-makers are accountable to third parties or where conflicts of interest loom: multiple shareholders with diverging interests, non-family managers needing protection, transactions with related parties, and foundations or institutional investors with fiduciary duties. In all these cases the independent opinion protects the actors from the later accusation of having sold too cheaply or bought too dearly. We position it as a building block of professionally led M&A advisory, not as an end in itself.
Cost, effort and timing
A fairness opinion in the mid-market costs a mid five-figure sum depending on complexity and takes two to four weeks once the data is available. Timing matters: it belongs before the final board decision, ideally shortly before signing, because it assesses a concrete negotiated price, not an abstract range. Our case studies show where in the process an independent valuation has genuinely eased decisions.
FAQ
Is a fairness opinion legally required? In the mid-market usually not. It arises from the duties of care of corporate bodies, shareholder agreements or the wish for protection.
Who may issue a fairness opinion? An expert independent of the deal with valuation competence, often an audit firm or a specialised M&A advisor without a success fee on this transaction.
Does it guarantee the best price? No. It only confirms the price lies within an adequate range. The best price comes from a well-run competitive process, not the opinion alone.