The review, conducted by Davis Global Advisors on behalf of O'Brien, the Irish telecoms and media tycoon, claimed that IN&M's board of directors were too close to chief executive O'Reilly, which risked harming profitability.
Stephen Davis, the author of the report, wrote: "The firm's Achilles heel is a board composed of directors who nearly all have affiliations in some fashion with the principal shareowner, who is also the chief executive."
IN&M said last night that it had been advised the report was defamatory and said that unless a public apology was forthcoming it would take legal action.
The report does not allege any malpractice by the board or the executive of the media group.
Responding to the threat of legal action, a spokesman for Denis O'Brien said he "would like to see answers to the questions he has been asking of the group in a series of letters given to shareholders at tomorrow's annual general meeting in Belfast".
Earlier this month, O'Brien paid around €31m (£21m) to raise his share in the media group from 7.28% to 8.35%. He has been steadily building his stake, which is now valued at around €250m, since last year.
But IN&M has spent nearly €40m acquiring its own shares in recent weeks, in what was seen as an attempt to make it difficult for O'Brien to increase his holding.
O'Reilly, who holds about 26% of the group, clashed with O'Brien in 2002 when he led a consortium that foiled O'Brien's attempt to buy Irish telecommunications company Eircom and take it private.
The size of O'Reilly's stake in IN&M has led some to discount the idea that O'Brien may make a takeover bid for the company, but weekend newspapers reported he may believe there is extra value in the business that has yet to be seen.
IN&M owns UK newspapers The Independent and The Independent on Sunday. It publishes 180 individual titles and operates in Ireland, the UK, South Africa, Australia, New Zealand and India.
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