How to Answer “What is a fairness opinion in an M&A deal, and who provides it?” in Investment Banking Interviews
“What is a fairness opinion in an M&A deal, and who provides it?” comes up frequently in investment banking interview prep because it tests whether you understand how valuation work connects to board process and disclosure.
A strong analyst answer defines a fairness opinion in M&A, states who issues it, and clearly explains the limits: it’s an opinion on financial fairness (based on valuation work), not a promise that the price is the “best” or that the deal will close.
What Interviewers Test: Financial Advisory Roles and Board Process
Interviewers are checking that you can explain a board-level M&A deliverable in plain language: what the opinion says, who it is addressed to, and why it exists. This is less about crunching a DCF live and more about showing you understand the deal process and governance.
They also want practical awareness of financial advisory roles—for example, when the company’s sell-side advisor provides the opinion versus when a board engages an independent advisor due to conflicts (related-party deals, management participation, special committees).
Finally, it tests judgement and communication: can you state the scope and key limitations (assumptions, reliance on management information, “financial point of view” wording) without overclaiming what the document guarantees?
Fairness Opinion in M&A: Step-by-Step Answer Framework
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Step 1: Define the fairness opinion and who it’s for
Give a one-sentence definition first: a fairness opinion is a written opinion stating whether the consideration in a transaction is fair, from a financial point of view, to a specified constituency (typically shareholders) as of a particular date.
Then immediately anchor the audience and context: it is usually addressed to the company’s board (or a board committee) to support their decision-making and disclosures in an M&A process. Mention that the opinion is scoped to the security being considered (common stock, preferred, etc.) and to the stated consideration (cash, stock, mix, exchange ratio). This keeps your answer precise and avoids drifting into “full valuation report” territory.
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Step 2: State who provides it in investment banking (and when independence matters)
Answer the “who” directly: the fairness opinion is commonly provided by the company’s financial advisor—often an investment bank—acting as an advisor on the transaction.
Add interview-level nuance: if independence is a concern (e.g., management buyout, controlling shareholder, significant conflicts, or the advisor has other relationships/fee incentives), boards may engage an independent financial advisor or seek a second opinion. This ties to the importance of fairness opinions in mergers: the board wants a defensible process and clear support that it considered the transaction’s financial terms with appropriate advice.
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Step 3: Summarise the valuation techniques behind it (without turning it into a modelling lecture)
Briefly describe the analysis foundation: the advisor typically triangulates value using valuation techniques in M&A such as trading comparables, precedent transactions, and a DCF (plus structure-dependent work like an LBO-style returns check when relevant).
Then connect the outputs to the deal terms: the advisor compares implied value per share (or the implied exchange ratio in stock deals) to the actual consideration being offered. Common “sanity checks” include implied multiples versus peers, premiums to unaffected share price, and sensitivity analysis around key assumptions (e.g., WACC/terminal growth in a DCF). Emphasise that the opinion relies on information provided by management and public sources and includes stated assumptions and limitations.
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Step 4: Clarify what a fairness opinion does not do (and why that matters in M&A interview questions)
To stand out in M&A interview questions, proactively state the boundaries. A fairness opinion is not:
- a guarantee that the deal is the best available price or that no better bid exists,
- an opinion on legal compliance or deal structure fairness in a broader sense,
- a solvency opinion (which focuses on the company’s ability to meet obligations post-transaction), or
- a prediction that the deal will close.
Close with the practical “why”: it’s one input—often an important one—in helping directors document an informed decision process, especially when scrutiny is high or conflicts are present.
Analyst Sample Answer for M&A Interview Questions
A fairness opinion in M&A is a written opinion—typically addressed to the company’s board—stating whether the consideration being offered in a transaction is fair, from a financial point of view, to the relevant shareholders as of a specific date.
It’s usually provided by the company’s financial advisor, most often an investment bank, and if there are conflict concerns the board may hire an independent financial advisor or seek a second opinion.
The advisor supports the opinion by running standard valuation work—commonly trading comparables, precedent transactions and a DCF—and then comparing the implied valuation range or exchange ratio to the actual deal terms. They’ll also sanity-check items like implied premiums to the unaffected share price and implied multiples versus peers. The analysis relies on management projections and other information and is delivered with assumptions and limitations.
Importantly, a fairness opinion doesn’t say the deal is the best possible outcome or that it will close; it’s a narrow statement about financial fairness that helps support board decision-making and disclosure during the M&A process.
- Use the exact phrase “fair, from a financial point of view” to show you know the standard wording.
- Answer “who provides it” in the first half of your response (financial advisor/investment bank; sometimes independent).
- Reference 2–3 valuation techniques and 1–2 quick checks (premiums, implied multiples) to show credibility.
- Explicitly state what it is not (best price, solvency, legal opinion) to avoid overclaiming.
Common Mistakes When Explaining Fairness Opinions
- Describing it as a full valuation report or an audit; it’s an opinion with defined scope and stated limitations.
- Claiming it proves the board obtained the “highest price” or that the deal is “good”; it addresses fairness from a financial point of view only.
- Failing to say who provides it in practice (typically the investment bank/financial advisor; sometimes an independent advisor).
- Ignoring conflicts of interest and independence considerations, especially where fees are contingent on closing.
- Mixing it up with a solvency opinion or other specialised opinions (different purpose and analysis).
- Overloading the answer with deep modelling detail instead of explaining audience, purpose, and scope clearly.
Follow-Ups on Valuation Techniques in M&A and Independence
When is a fairness opinion typically delivered in an M&A process?
Most commonly around signing so the board can rely on it in its decision process and disclosures; it may be updated if there are material changes before closing.
Who provides a fairness opinion in investment banking if the main advisor has a conflict?
A board may engage an independent financial advisor or obtain a second opinion, often alongside a special committee in related-party or management-involved deals.
What valuation techniques in M&A are most commonly referenced in fairness opinions?
Trading comps and precedent transactions are standard, with a DCF as an intrinsic cross-check; stock deals also focus on exchange-ratio and relative value analysis.
Is a fairness opinion the same as a recommendation to shareholders on how to vote?
No—it's an advisor’s opinion to the board on financial fairness; the board’s voting recommendation is a separate statement in the transaction disclosure.
Why is the importance of fairness opinions in mergers often discussed in the context of fees?
Because advisors may earn success fees if the deal closes, boards focus on independence, disclosure, and process to manage perceived conflicts.
Investment Banking Interview Prep: How to Practise This Question
- Practise a 45–60 second version: definition → who provides it → what work supports it → what it is not.
- Build a mini “valuation toolkit” for this prompt: comps, precedents, DCF, plus two checks (premium and implied multiples).
- Rehearse one line on conflicts/independence (independent advisor, second opinion, special committee) so you can handle follow-ups.
- On AceTheRound, drill this as a spoken answer and then practise expanding into: “How would you support the fairness work as an analyst?” (comps screen, precedent set, sensitivities, disclosure-ready tables).
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