Fairness Opinions

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 723 words

A fairness opinion is a short written opinion from an independent valuation professional stating whether the price in one specific proposed sale is fair, from a financial point of view, to the company's owners. It is not a full valuation of the company, not a recommendation to accept or reject the deal, and not a guarantee against complaints.

Boards of public companies routinely obtain one before approving a sale, because it helps show they looked after shareholders on price. The same logic applies to a closely held company whenever the person running the sale is not the only owner.

Fair market value and fairness are not the same question

Fair market value is the familiar standard: the price a willing, informed buyer and a willing, informed seller would agree on, with neither forced to act. It describes the company in general. You may also hear the phrase "fair value"; its meaning depends on the legal or accounting context, and your attorney will tell you which standard applies to your situation.

A fairness opinion asks something narrower. It looks at one actual transaction, with one buyer and one price, and concludes whether that price falls within a reasonable range. The preparer may use valuation methods to get there, but the answer is about the deal on the table, not about the business in the abstract.

When a private company should consider one

• The president or managing owner is negotiating on behalf of shareholders who are not active in the business.
• Family members hold shares and disagree about price or timing.
• Outside investors or a minority partner could later argue the company was sold too cheaply.
• The buyer is an insider, such as a relative, a partner or the management team, so a conflict of interest is obvious.
• The agreed price is well below what some owners expected, and they will want to know why.

What the letter contains, and what it leaves out

The document itself is usually a few pages, backed by a longer working file the preparer keeps in case the conclusion is ever questioned. The letter lists what the preparer reviewed, such as financial statements, the draft purchase agreement and market data on comparable transactions, describes the methods used and states the conclusion.

The limitations deserve as much attention as the conclusion. The preparer typically relies on figures supplied by management without auditing them, does not appraise individual assets, and comments only on price. It does not judge how the deal is structured, and a sale with a large earnout (part of the price paid later only if targets are met) or a seller note can carry a fair headline number and still leave owners with less cash than an alternative. Our guide on how to compare offers shows how to look past the headline.

Who prepares it and when

Choose an independent, credentialed valuation professional who has no stake in whether the deal closes. An advisor paid a success fee has an interest in the transaction going through, so an opinion from a separate firm carries more weight if it is ever challenged. The difference between this and a broader appraisal is covered in our answer on formal third-party valuations before a sale.

Timing matters. The opinion is normally prepared once the main terms are agreed in the letter of intent and before the definitive agreement is signed. Your transaction attorney decides whether one is needed and how it fits with the shareholder approval your company documents require. It is not a substitute for a good shareholder agreement, and talking to minority owners early, before a buyer is chosen, usually prevents more disputes than any letter written afterward.

How MDR & Associates deals with disputes over price

The strongest answer to "we sold too cheaply" is a documented competitive process. We take a company to our database of qualified individual buyers, capital groups and private equity groups, negotiate multiple letters of intent at the same time where the market allows, and present every offer to the owners in person. That record shows what the market actually offered.

A formal third-party business valuation is a separate, optional service with its own price. If your attorney recommends an independent fairness opinion, we coordinate with whoever prepares it. For a first view of where your company stands, start with a free valuation snapshot.

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Questions owners ask next

Does a fairness opinion stop a shareholder from suing?

No document can prevent a lawsuit. A fairness opinion supports the argument that the people approving the sale made an informed decision on price, which can make a claim harder to win. How much protection it gives depends on your company documents and the facts, so your transaction attorney should advise on it.

Who usually pays for a fairness opinion?

The company normally pays, as a cost of the transaction. The fee should be agreed in advance and should not depend on whether the deal closes or what the opinion concludes, because an opinion paid only when it approves the price is easy to attack.

Do I need one if I own the whole company?

Rarely. If you own every share, the only person who could object to the price is you. It becomes relevant when there are other shareholders, family owners, investors or lenders whose interests are affected by the price you accept.