Baker McKenzie Corporate and Securities Partner, Michelle Heisner, was published in the April 2024 edition of The Investment Lawyer. Her article, "Best Practices for Fairness Opinions in GP-Led Secondary Transactions," reviews the US Securities and Exchange Commission's (SEC) new requirement that a fairness or valuation opinion must be obtained and disclosed to investors in all instances of adviser-led secondary transactions.
On August 23, 2023, the US Securities and Exchange Commission (SEC) adopted rules applicable to investment advisers to private funds. Included among these rules was the requirement that a registered investment adviser conducting an adviser-led secondary transaction with respect to any private fund that it advises (other than a securitized asset fund) must obtain, and distribute to investors in the private fund, a fairness or valuation opinion.
While on its surface, the SEC’s new rule may not appear to change the practice of many funds—after all, the practice of obtaining fairness opinions in general partner-led secondaries and disclosing them to limited partner advisory committees has become increasingly common—the language of the SEC’s rule and the color provided by its adopting release do not explicitly address a number of existing market practices. As such, now is an appropriate time for stakeholders to level set expectations around fairness opinions to better ensure smooth delivery and consistency in the market.1
Michelle goes on to offer practical guidance to private equity funds and their financial advisers for the preparation and issuance of fairness opinions under the newly adopted rule. Specifically, she covers in detail to whom the opinion should be distributed, what the opinion should cover and what needs to be disclosed in that opinion.
1 Copyright © 2024 CCH Incorporated. All Rights Reserved. Reprinted from The Investment Lawyer, April 2024, Volume 31, Number 4, pages 11–15, with permission from Wolters Kluwer, New York, NY, 1-800-638-8437, www.WoltersKluwerLR.com