58 Pages Posted: 30 Jun 2006 Last revised: 11 Sep 2009
Date Written: March 18, 2008
From 1994 to 2003, 80% of targets and 37% of acquirers obtain a third-party assessment of the fairness of a merger or acquisition. These fairness opinions do not affect deal outcomes when used by targets, but they affect deal outcomes when used by acquirers. The deal premium is lower in transactions if the acquirer obtains a fairness opinion, and further reduced if multiple advisors provide that opinion. However, the acquirer's announcement period return is 2.3% lower if the acquirer has a fairness opinion, especially if the acquirer pays a high premium, indicating that investors are skeptical of these transactions.
Keywords: Fairness opinion, merger, conflict of interest, deal premium, announcement return.
JEL Classification: G34, G24, J33
Suggested Citation: Suggested Citation
Kisgen, Darren J. and Qian, Jun and Song, Weihong, Are Fairness Opinions Fair? The Case of Mergers and Acquisitions (March 18, 2008). AFA 2007 Chicago Meetings Paper; EFA 2006 Zurich Meetings; Journal of Financial Economics (JFE), Vol. 91, No. 2, 2009. Available at SSRN: https://ssrn.com/abstract=1031256