What is the purpose of a fairness opinion?

A fairness opinion serves as an assessment of the financial terms of a merger or acquisition, determining whether the proposed deal is fair from a financial perspective to the shareholders. This opinion is typically issued by an independent financial advisor or investment bank, who analyzes various factors such as the valuation of the companies involved, market conditions, and the intrinsic value of the entities to provide a thorough evaluation. By providing this level of scrutiny, a fairness opinion aids boards of directors and stakeholders in making informed decisions, ensuring that they are not agreeing to terms that may undervalue or overvalue the transaction.

The other choices, while related to financial transactions in general, do not accurately reflect the primary function of a fairness opinion. Legal advice pertains to the legality and structure of agreements, regulatory compliance focuses on adherence to financial regulations, and earnings potential assessments deal with future profitability forecasts rather than the fairness of transaction terms. Therefore, option B correctly identifies the specific focus of a fairness opinion in the context of mergers and acquisitions.