Using Fairness Opinions to Manage Risk in Middle-Market Transactions

Brian A. Sullivan, CPA/ABV, CVA, CBA, CFE, CMAP, RIA, and Andrew C. Smith, CPA/ABV, ASA, CVA, CMA, CMAP

Since the 2008 financial meltdown and the earlier enactment of the Sarbanes-Oxley Act of 2002 (SOX), there has been an ever-increasing outcry from the public for greater corporate transparency, accountability, and fairness. But this heightened awareness and perceived lack of trust in the markets has created a dangerous environment for boards of directors; they must now demonstrate that they acted prudently and fairly, and considered shareholders' opposing interests, whatever their stock—preferred, common, or convertible—when evaluating acquisition and divestiture opportunities. Failure to make this effort may cause a board to face costly litigation and even potential personal liability from an unhappy shareholder who feels slighted during the process.