The True Meaning of a Fairness Opinion

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 736 words

A fairness opinion is a letter from a qualified financial professional stating whether the price in a specific transaction is fair, from a financial point of view, to a particular group, usually the shareholders. It is not an appraisal of the company, not advice on whether to do the deal, and not a guarantee of anything. Its main purpose is to show that the people approving a transaction took reasonable care.

The term is often confused with fair market value, and the confusion leads owners and buyers to expect more from a fairness opinion than it provides, or to pay for one they do not need.

Fairness opinion versus fair market value

The names sound alike but answer different questions. Fair market value is an estimate of the price a willing buyer and a willing seller would agree on in an open market, both reasonably informed and neither forced to act. A valuation produces that estimate for a company or an ownership interest.

A fairness opinion starts with a deal already on the table and asks whether its price and terms fall within a reasonable range. It may use valuation methods to reach that conclusion, but the output is a judgment about one transaction, not a stand-alone number for the company.

What it covers and what it does not

That reliance on management's information is its main limitation. A fairness opinion is only as good as the data behind it, which is why the people relying on it should also understand where the numbers came from.

• It reviews the transaction's financial terms, relying mostly on information supplied by management.
• It explains the analysis and states the conclusion in a letter.
• It does not recommend whether to proceed, or say whether a better deal was available.
• It does not audit or independently verify the information it relies on.

Who prepares one, and who uses it

Fairness opinions come from professionals with valuation expertise: investment banks, valuation firms, and some M&A advisors and business appraisers. They are most common in public company deals, where a board of directors uses one to show it acted in the shareholders' interest.

In private companies, they appear mainly where some owners are not at the negotiating table, for example minority shareholders, family members who are not active in the business, or the trustee of an employee stock ownership plan. Because the opinion documents the decision-makers' care, it can matter if an owner later challenges the price in court. Timing counts too: the opinion speaks as of a date, usually just before the deal is approved, so a long delay before closing weakens it.

What preparing one involves

The provider reviews the transaction documents, the company's financial statements and management's projections, and usually interviews management. It then analyzes the price with methods such as comparable companies, comparable transactions and discounted cash flow, and compares the results with the terms on offer. The conclusion, and the main assumptions behind it, go into the letter, often with a longer supporting report for the board. The work is narrower than a full valuation because it addresses a single deal, but it must be thorough enough to stand up if it is ever challenged.

Does a lower middle market deal need one?

Usually not. In most private sales of companies with a few owners who all approve the deal, the protection a fairness opinion offers is already provided by the owners' own decision, a competitive process with several offers, and their advisors. It becomes worth considering when some shareholders are passive or disagree, when the buyer is related to the seller, such as management or a family member, or when a trust or other fiduciary must approve. A buyer acquiring with outside investors or its own board may also want one to support the decision.

For most owners, the more useful question is whether an offer reflects fair market value; this guide on judging whether an offer is fair market value covers it, and a formal third-party valuation is the more common tool.

How MDR & Associates approaches fairness

MDR & Associates creates price evidence the direct way: by bringing multiple qualified buyers to the table and negotiating several letters of intent at the same time, so the market shows what the company is worth. Where a formal opinion is needed, a third-party business valuation is available as a separate service. To discuss your situation, contact us.

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Questions owners ask next

Is a fairness opinion the same as a business appraisal?

No. An appraisal estimates the value of a company or an ownership interest. A fairness opinion judges whether the price in a particular transaction is fair to a particular group. Appraisal methods may be used inside a fairness opinion, but the two answer different questions and are prepared for different purposes.

Who pays for a fairness opinion?

Normally the party that commissions it, usually the company or its board, since the opinion supports their decision. Ask any provider how its fee is set, because a fee that depends on the deal closing can raise questions about independence. Cost depends on the size and complexity of the transaction.