In investment banking, what does a fairness opinion primarily address?

A fairness opinion primarily addresses the financial fairness of a specific transaction. This is a key document typically provided by an investment bank or financial advisor during a merger or acquisition process. Its main purpose is to assess whether the terms of the transaction are fair from a financial perspective to the shareholders of the company involved.

The fairness opinion involves a detailed evaluation of the pricing, structures, and terms of the deal, comparing these against various valuation methods and market precedents. This helps ensure that the transaction is equitable and provides a form of protection for the board of directors against claims of inadequacy in price or unfair dealing.

By focusing on the financial aspects, the fairness opinion plays a crucial role in guiding the decision-making processes of the executives and board members, as it is an essential part of demonstrating due diligence and protecting shareholder interests during negotiations.