An Independent Expert Report (IER) is an independent assessment of a proposed transaction undertaken for the purpose of stating if the transaction is fair and reasonable to shareholders, or in their best interests to proceed.

An IER provides guidance to shareholders from an independent and reliable source providing them with the reassurance of the information they are relying upon to make an informed decision on the proposed transaction.

An IER is usually commissioned in accordance with the ASX to meet listing rule requirements. An independent expert report usually includes:

• A summary of the proposed transaction
• An analysis of the entities involved and associated businesses
• A summary of the industries in which the relevant entities’ businesses operate
• The trading history of the entities involved
• A summary of the benefits and disadvantages of the transaction
• A valuation of the securities involved in the transaction, if relevant, (e.g. shares, units or other investments)
• A comparison between the value of the securities and what you are being offered as an investor
• The expert’s opinion, the basis of their opinion and the method and assumptions used to reach their conclusions

What is a ‘fair’ transaction?

A transaction is considered ‘fair’ if the value of what you are being offered (cash, shares or a combination of both) is equal to or greater than the value of the shares the company gains (and you give up) as a result of the transaction.

If the expert thinks that the value of what is being offered is less, the report will note that the transaction is ‘not fair’.

What is a ‘reasonable’ transaction?

If a transaction is considered ‘fair’, it is also considered to be ‘reasonable’. However, if an expert considers a transaction to be ‘not fair’, they will look at other factors beyond value to determine whether it is ‘reasonable’. These factors may still make the transaction beneficial to shareholders.

For example, in a takeover bid the share price offered may be considered ‘not fair’. However, an expert may consider the bid to be ‘reasonable’ because there are unlikely to be any alternative bidders and the share price may fall if the takeover bid is unsuccessful.

Additional Information can be found at ASICS Money Smart guide and Regulatory Guide 112

Transactions that may require an IER include:

• Takeover bids
• Compulsory acquisitions and buy-outs
• Schemes of arrangement
• Related party transactions
• Capital reorganisations

Some companies may choose to commission an independent expert report even if they are not legally required to.

Other Assurance Services

We also offer Investigating Accountant’s Reports (IARs) to our public companies as well as other IPO Services.