The Importance of Fairness Opinions –Public Mergers & Acquisitions
Transactions: Spotlight Germany
Public Takeover
Due to the specific corporate governance structure oflisted companies with typically widespread shareholder
bases, public takeovers have been regulated by aEuropean directive subsequently implemented into
national takeover laws.
One of the key objectives of the takeover regulation isto provide the target company’s shareholders with
sufficient information and time to be able to make an

informed decision in relation to an offer. The German
Securities Acquisition and Takeover Act (“TakeoverAct” or WpÜG) requires the board of management
and supervisory board of the target company to publish
a so-called substantiated statement (according tosection 27 of the Takeover Act) to comment on abidder’s offer, including on the appropriateness ofthe offered consideration.

Key Elements Of Public Takeover Process In Germany
BidderTo shareholders forshares in target

Shareholders

Recommend toshareholders

BidCoOffer

SubstantiatedStatement
Board(s)evaluate offerBoard(s)Listed Target

To support

Fairness
Opinion
Provided tocomment on the offer (according to section 27 of theTakeover Act, and especially with regard to theappropriateness of the offered consideration). The
Boards may, but are not obliged to, publish a joint
substantiated statement. Hence, individual statements
by each Board, supported by separate fairness opinions,have also been common practice over recent years.
In addition, the Board(s) may wish to receive fairness
opinions from more than one financial advisor toenhance objectivity and independence.

Fairness Opinions In Public Takeovers Have
Become Market Standard In Germany
Over the last few years, boards of management and/orsupervisory boards (individually “Board” or together“Boards”) have increasingly obtained an external fairness
opinion to support their substantiated statement, andthe practice has become market standard. The Board(s)of the target company can rely on a fairness opinion in
preparing their own statement of position to theirshareholders, in accordance with their obligation toAnnounced Public Takeover Offers In Germany With Fairness Opinion
282723

2127
2181%

21

1485%
71%

64%

2378%

1165%

63%

15

17

1215

17

9

23

15

1862013

2014

2015

2016

2017

2018

2019

2020

2021

2022

57%

54%

55%

Number oftakeover offers
Number of takeoveroffers covered by afairness opinion

Source: BaFin (Federal Financial Supervisory Authority), German Takeover Report 2022, Kroll research

A fairness opinion in the context of a public
takeover serves the following key purposes:• Assessment of the financial appropriateness of an
offer for the shares of the target company within themeaning of the Takeover Act, from the perspectiveof the shareholders of the target company• Supporting element that the target company’sBoard(s) have fulfilled their fiduciary duties todiligently explore the facts under the businessjudgement ruleFairness Opinions Based On International
Common And Acceptable Standards By
Qualified And Independent Financial Advisors
Are Becoming Increasingly Important
In a public takeover situation, Board(s) must makedecisions that are subject to intense external scrutiny.
The financial advisor issuing a fairness opinion assists
the Board(s) in this complex decision-making process,supporting their duty to act on an informed basis.

2Thus, the respective financial advisor should have thenecessary professional qualifications and experience.
A fairness opinion in the public takeover domain is
supported by a fundamental valuation analysis utilizing
internationally accepted methodologies, including a
discounted cash flow analysis, public company market
multiples and/or precedent transaction multiples. Theanalysis leads to objective and highly informative advice
that provides the Board(s) and shareholders with a truly
independent view of the current fair market value of thetarget company and the financial appropriateness of theconsideration to be received by the target shareholders.

The Role of Kroll’s Opinions
Practice In Public Takeover
Transactions
In our role as independent financial advisors, wetypically opine on the fairness of the consideration tobe received by the target shareholders that elect toaccept the offer of the bidder for their shares in thetarget company.

The Kroll Difference
The Opinions practice of Kroll serves as an independent
advisor to management boards, supervisory boards,
special committees and other fiduciaries and, in thiscapacity, we are a leading global provider of fairness
opinions in corporate transactions. Our team has
expertise in situations where advisor independence
is paramount and scrutiny is elevated.
We have provided more than 1,500 fairness opinionswith almost $700 billion in aggregate deal value
since 2005.

for Fairness Opinions Globally in 2022
Refinitiv’s Global Mergers & Acquisitions Review - Full Year 2022

Contact Us:
Andreas Stoecklin
Country Head Germany
Head of EMEA Corporate FinanceFrankfurt+49 172 8599 596
andreas.stoecklin@kroll.com

Dr. Simon von Witzleben
Co-Head EMEA
Transaction Opinions
Munich/London+49 176 3000 6107
simon.vonwitzleben@kroll.com

Philipp Bose, CFA
Director
Corporate Finance
Munich+49 176 3000 6104
philipp.bose@kroll.com

Mathis Ebeling
Director
Corporate Finance
Munich+49 176 3000 6116
mathis.ebeling@kroll.com

International Contacts:
Chris Janssen
Global Head ofTransaction Opinions
Chicago+1 312 697 4655
chris.janssen@kroll.com

David Lee, CFA
Co-Head EMEA
Transaction Opinions
London+44 7553711391
david.lee@kroll.com

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