A recent post by Matt Crow, president of Mercer Capital, on our RIA blog, RIA Valuation Insights, gives me a reason to jump back in to posting here. In his recent post, “An All-Terrain Clause for your RIA’s Buy-Sell Agreement,” he addresses buy-sell agreement pricing provisions for a rapid, substantial change in company performance.
Buy-sell agreements are designed to accomplish one or more business objectives from one or more of several viewpoints: the corporation, the employee-shareholder, the shareholder who is not an employee, and any remaining shareholders. The buy-sell agreement provides for what happens to the shares of owners who leave, for whatever reason, whether favorable or unfavorable. In this post, we walk through several trigger events, accounting for the favorable and unfavorable circumstances, and considerations that impact the company, the shareholders, and the buy-sell agreement.
In the last post, we defined buy-sell agreements, at least in terms of a layman, noted key business issues that must be addressed, confirmed that buy-sell agreements are common to all corporate forms and industries, and profiled the types of companies we are addressing. Now it is time for a quick look at the three main categories of buy-sell agreements.
Buy-sell agreements have been likened to business owners’ prenup agreements. They are certainly not romantic, but buy-sell agreements are among the most important and most neglected of corporate and legal agreements. What is not clearly understood, however, is that they are also business and valuation documents.
In 2007, I published my first book on buy-sell agreements, Buy-Sell Agreements: Ticking Time Bombs or Reasonable Resolutions (now out of print). The audience was business owners as well as attorneys and other professional advisers. In my second book on the topic, Buy-Sell Agreements for Closely Held and Family Business Owners, (published in 2010) I honed down the […]
The creation of buy-sell agreements involves a certain amount of future-thinking. The parties must think about what could, might, or will happen and write an agreement that will work for all sides in the event an agreement is triggered at some unknown time in the future. This post addresses nine important characteristics of buy-sell agreements that are important for business owners and for attorneys advising them.
Last week, I attended the joint AICPA/AAML and spoke on Friday. I spoke on the topic of buy-sell agreements and related the subject matter to divorce, as divorce is a frequent trigger event in buy-sell agreements. I also participated in a panel labeled the Battle of New Orleans 2016. This post recaps some speaking highlights of my time in New Orleans.
If an asset manager’s buy-sell agreement is going to specify reasonable expectations for the value of the firm, what are they? We think there are at least four elements that should be clearly stated in each buy-sell agreement to ward off costly ambiguity. Read this guest post by Matthew R. Crow, ASA, CFA, President of Mercer Capital.