January 13, 2017
A recent ruling by the Court of Appeal of Yukon involving InterOil Corp. and ExxonMobil Corp. negotiations challenges the standard practice of a single fairness opinion. A Lexpert article features partner Sharon Geraghty as she shares her experience and assessment concerning how the Court’s decision will influence board members’ future practices. Sharon weighs in on the discussion in the excerpt below:
Sharon Geraghty, an M&A lawyer at Torys LLP, says a single fairness opinion is standard practice on Bay Street and she’s used a second, flat-fee opinion once or twice “at most” in all the deals she’s done in the last five years. Asked why a second, independent opinion is so seldom warranted, Geraghty says it’s unnecessary when boards are rigorously testing their financial advisers’ assumptions and asking the right questions, adding, “don’t forget there’s a very real cost to this. Remember, not all deals are $2-billion deals.”
…Geraghty says the concern is that InterOil may lead boards to retain an independent bank for a second opinion even when it’s not worthwhile to do so. “It becomes a kind of check-the-box thing and boards might feel uncomfortable if they don’t have it if it starts to be seen as a necessary element of their governance process.”
Read the full article here.
For more insight on fairness opinions, read “How Fair is Fair? The Spotlight Will be on the M&A Sales Process,” an article co-authored by Sharon here.