The January 2015 issue of Bank Watch is available now, which features the article “Fairness Opinions: Evaluating a Buyer’s Shares from the Seller’s Perspective” written by Jeff Davis.
Our experience is that some, if not most, members of a board weighing an acquisition proposal do not have the background to thoroughly evaluate the buyer’s shares. Even when financial advisors are involved there still may not be a thorough vetting of the buyer’s shares because there is too much focus on “price” instead of, or in addition to, “value.”
A fairness opinion is more than a three or four page letter that opines as to the fairness from a financial point of a contemplated transaction; it should be backed by a robust analysis of all of the relevant factors considered in rendering the opinion, including an evaluation of the shares to be issued to the selling company’s shareholders. The intent is not to express an opinion about where the shares may trade in the future, but rather to evaluate the investment merits of the shares before and after a transaction is consummated.
This issue also contains links to various articles of interest, as well as public market indicators, M&A market indicators, and key indices of the top financial institutions in the U.S., providing insight into financial institution valuation issues.
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