The Facade of Fairness Opinions and the Delaware Courts

The M&A Law Prof Blog has provided exemplary coverage of the the Sallie Mae case, a $25 billion dollar buyout gone bad.  In particular, the Blog has available a transcript of a hearing in the case before VC Strine in the Delaware Court of Chancery.  The transcript has a number of particularly interesting comments, including a decision by VC Strine to require a joint press release from news agencies on the outcome of the hearing.  But for our purposes, the most interesting was this exchange on fairness opinions. 

THE COURT: A fairness opinion is just a fairness opinion.

MR. WOLINSKY: A fairness opinion, you know -- it's the Lucy sitting in the box: "Fairness Opinions, 5 cents."

Marc Wolinsky is a partner at Wachtell, Lipton.  Needless to say, this is one of (if not the) preeminent firms in the representation of issuers on corporate matters, something that no doubt includes regular advise to obtain fairness opinions. 

Fairness opinions, in the aftermath of Van Gorkom, have become extraordinarily common and are used to largely fulfill a board's duty to be informed.  The Delaware courts do not require evidence that the report was actually read and used in the decision making process.  It is enough to have one in the file so to speak. 

The quote from Wolinsky merely reflects what most already know in this area, that fairness opinions are easy to obtain, that financial advisors providing them have an incentive to give management what they want, and that they provide little real protection for shareholders.  In other words, their use is a facade, much like independent directors.  Perhaps with Wolinsky's comment, the Delaware court will acknowledge what the bar already knows.  "A fairness opinion, you know -- it's the Lucy sitting in the box: 'Fairness Opinions, 5 cents.'"