My post on the Tesla/SCTY offer about the ineptitude and laziness that Lazard and Evercore brought to the valuation process didn’t win me any friends in the bank M&A world. And in addition, some pushback was attracted by it, not so much from bankers, but from journalists and lawyers, taking me to the job for not understanding the framework for these valuations. As Matt Levine notes in his Bloomberg column, where he cites my post, “a fairness opinion is not just a real valuation, not a pure effort to estimate the value of an organization from first principles and 3rd party research” (Trust me. No one is setting the bar that high.
What is a fairness opinion? I am not just a lawyer, and I don’t play intend to play one here, but it could very well be to revert back again to the legal description of the term best. In a great article on the topic, Steven Davidoff defines a fairness opinion as an “opinion provided by an outsider a transaction meets a threshold degree of fairness from a financial perspective”. Implicit in this definition will be the assumptions that the outsider is qualified to complete this common sense and that there is some realistic standard for fairness. Note that while fairness views have become part and parcel of all corporate and business control transactions, they are not required either by legislation or rules.
As with so much of business law, especially relating to acquisitions, the basis for … Read more