A good explanation of the “Single Appraiser: Select Now, Value Now” recommendation from my book Buy-Sell Agreements for Closely Held and Family Business Owners was recently featured in NACVA’s email newsletter. Read it here (also includes a link to the original article on Mercer Capital’s website further explaining this buy-sell agreement recommendation).
Buy-sell agreements are ownership transition plans in disguise. Few business owners think about their buy-sell agreements in this light, but if your agreement is triggered, either through the death of a shareholder or otherwise, then ownership will change hands. Your buy-sell agreement is really ownership transition on autopilot. The real question is whether you, the other owners and the company will land safely when a trigger event occurs or if some or all of you will crash and burn. This short post addresses a simple question: Do you know what will happen if your buy-sell agreement is triggered?
My last post described an early promissory note valuation that provided me with an object lesson in humility. This post is the follow-up to show that it is possible to learn from such lessons and to lay the groundwork for future growth. The ending of this two-part series is happier than its beginning!
I’ve said many times that no formula agreement can be written that will provide reasonable valuation calculations over time under all circumstances involving a company, its industry, the national economy, conditions in the financial markets, and more. This week, I review the case, Roth v. United States, 511 F. Supp. 653 (E.D. Mo. 1981) and the appeal to make this point.
In May, I’ll be speaking at the AAML/BVR National Divorce Conference in Las Vegas. My topic is “How to Present Complex Finance to Judges.” Given that every divorce trial I’ve seen has been a bench trial, the topic focuses on judges. However, many of the same presentation techniques are certainly applicable to juries, as well.
The idea for this post is simple. I’m asking readers to provide me with examples of the best demonstratives they have seen to present complex financial and valuation issues in court. I’ll also be talking about concepts and ideas, so any thoughts regarding conceptual approaches or philosophical approaches to court testimony would also be helpful.
If your company or your clients’ companies have formula pricing for their buy-sell agreements, the likelihood of future problems is high. It is just not possible to foresee all possible future circumstances when setting a formula today. The solution to these problems lies in a Single Appraiser, Select Now and Value Now valuation process.
Fixed price buy-sell agreement pricing mechanisms are not good and seldom work. The problems with these agreements can be “fixed” if the parties focus on the future and take steps today to solve future problems before they occur. In this post, I discuss two single appraiser processes to help solve these problems.
The idea for naming the appraiser at the time a buy-sell agreement is signed was not original to me. I first heard of the idea in the late 1980s when I learned that I had been named as the appraiser in a buy-sell agreement that had been signed a few years before. However, since learning of the idea, I’ve adopted it and promoted it widely in my books and articles on buy-sell agreements.
More than a decade ago, I was writing my first book on buy-sell agreements. While I was working on it, a long-time friend, let’s call him William, who had significant knowledge about the value of businesses, called me to relay a true story about how one buy-sell agreement ended very badly for his family.