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Re: Fairness Opinions, Why are they so necessary in mergers?
Chapman, Spira & Carson - Disscusion

From: Robert Spira
Date: 3/29/99
Time: 3:24:32 PM
Remote User:


Basically we are talking here about something to cover management's ass. If things go well, then no one has a problem, but in the unlikely event that they don't, there are enough litigious people around that want to someone that they just can't afford to take chances.

Although a third party "fairness opinion" is not the word of God, it creates another barrier to litigation by allowing someone to step into management's shoes relative to the fairness of the transaction at the time it was completed.

No one knows better than the management of the actual companies involved in the proposed transaction what kind of synergy they have. Thus, a third party coming in at the twelfth hour, add little to the equation but lawsuit protect.

It is a sad commentary on the state of the investing world that we have to have people, potentially unfamiliar with the nature of two businesses that want to combine, writing these opinions just so officers and directors can sleep a little better at night. This is a case of the few really bad players in the industry, making it rough for legitimate management's to pursue what they believe are the best interests of their company without getting hounded to death every time they make a mistake. If you don't make the attempt, you are not going to succeed.

In spite of the above, we write these kinds of things and do a pretty good job at it. It pays well because the downside is so great. The risk incidently has been recently dimiished by the changes in the securities laws.

At times there are wierd classes of voting and non-voting stock with things like exploding prefereds and multiple warrants along with portfolios containing almost uninterpretable securities alternatives. These types of evaluations require the wisdom of Solomon and the patience of Job to work out, so once in a while we do earn our money.

Last changed: March 17, 2000