TLDR:
A fairness opinion is a professional assessment by a financial advisor — typically an investment bank — stating whether the terms of a transaction (merger, acquisition, buyout) are fair from a financial perspective to shareholders.
When Fairness Opinions Are Required
While not always legally required, fairness opinions are commonly obtained in any transaction where the board of directors faces a potential conflict of interest or needs to demonstrate it acted in shareholders’ best interests. Public company M&A transactions almost universally involve fairness opinions. Private company transactions, particularly those involving related-party dealings, management buyouts (where management may have different interests than shareholders), or transactions where minority shareholders might challenge the terms, also frequently involve fairness opinions as a defensive measure.