Gb08_engl Umschlag:GB 2005 - DVFA

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featuPress reactions to the DVFA financial papers Equities_ series_
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Financial Paper: Fairness Opinions
Fairness opinions are statements by external advisors on the financial appropriateness
of a merger or acquisition. In Germany, they are usually drafted for, and at the behest of,
the management and supervisory boards of target and bidder companies in connection
with a takeover bid. A fairness opinion comprises two parts: The valuation memorandum,
in which the transaction is described in detail, along with the informational basis, the
valuation process and the procedure used to arrive at the opinion. And the opinion letter,
which summarizes the transaction and contains the final opinion.
The importance of fairness opinions is growing within the German M&A market. Nonetheless,
there has until recently been a lack of standards with respect to the content,
form and (if applicable) publication of fairness opinions, as well as the proper handling
of potential conflicts of interest. In September 2007, the DVFA Fairness Opinions Expert
Group developed standards for fairness opinions for the boards of target companies in a
takeover bid, in connection with which section 27 WpÜG of the German Securities Acquisition
and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz - WpÜG) requires an
assessment of the financial appropriateness of the consideration offered. This assessment
is often supported by the fairness opinion.
In November 2008, under the chairmanship of Prof. Bernhard Schwetzler, the Fairness
Opinions Expert Group published the financial paper: “Fairness Opinions for the Management
and Supervisory Boards of Target and Bidder Companies (Fairness Opinions) - in conjunction
with offers for acquisition of securities in accordance with the German Securities
Acquisition and Takeover Act (WpÜG)”, which expands the standards to include the
perspective of the bidder companies. The new version of the financial paper provides a
complete set of rules for the assessment of M&A transactions. For the bidder company,
just as for the target company, the fairness opinion can serve as proof that the management
board has acted in accordance with its obligations.
The new standards for bidder companies are focussed primarily on the proper handling of
conflicts of interest: here as well, the principle of transparency requires full disclosure of
all potential conflicts of interest on the part of the fairness opinion author. This is especially
relevant when the author advises the company with respect to the appropriateness
of the transaction in exchange for a performance fee. The substantive requirements for
fairness opinions in the case of (voluntary) disclosure are significantly less stringent
than those requirements applicable to the target company: General information on the