[2][3] They are typically issued when a public company is being sold, merged or divested of all or a substantial division of their business.
[5] Some of the specific functions of a fairness opinion are to aid in decision-making, mitigate risk, and enhance communication.
A potential exists for a conflict of interest when an entity rendering an opinion may benefit from the transaction either directly or indirectly.
[8] In response, in the United States, the Financial Industry Regulatory Authority (then the National Association of Securities Dealers) issued its Rule 2290 to require disclosure by its members to minimize abuses;[9] this was approved in 2007 by the Securities and Exchange Commission.
[10] In the United States, in the context of stockholder lawsuits,[11] typically relating to the sale or merger of a public company, the Delaware Court of Chancery has required sufficient disclosures be made to a board of directors and shareholders to “provide a balanced, truthful account of all matters”[12] and said “When a document ventures into certain subjects, it must do so in a manner that is materially complete and unbiased by the omission of material facts.”[13] In a Memorandum Opinion in the CheckFree/Fiserv merger Chancellor Chandler underlined that the earlier In re Pure Resources Court had established the proper frame of analysis for disclosure of financial data: “[S]tockholders are entitled to a fair summary of the substantive work performed by the investment bankers upon whose advice the recommendations of their board as to how to vote on a merger or tender rely.”[14] According to the certification hypothesis fairness opinions may also serve the interest of the shareholders by mitigating informational asymmetries in corporate transactions.