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.
Since the idea of a fixed price buy-sell agreement is appealing and conceptually simple, many companies employ it. The problem is that the parties seldom reset the prices in their fixed price agreements — a major problem in the current environment considering the value of many businesses changed under the new tax law. In this post, we consider the impact of the Tax Cut and Jobs Act on fixed price buy-sell agreements.
One day a number of years ago, I received a call from an attorney. On that initial call, he told me about a bizarre buy-sell agreement process that was underway. The attorney represented a company. Based on a buy-sell agreement of some age, an option provided by the agreement had been triggered, and one of the companies had the right to acquire the company at its fair market value.
The pricing mechanism is that part of a buy-sell agreement that defines how the price for transactions triggered under it will be determined. There are three basic types of pricing mechanisms: Fixed price buy-sell agreements. The price at which transactions occur is set by agreement of the parties within some buy-sell agreements. The price is set […]
In a recent conversation with an author, lawyer and business transition planner, the topic of buy-sell agreements for companies that are 100% owned by a single shareholder came up. Nick Niemann, author of The Next Move for Business Owners, was talking about transition and exit planning when the broad topic of buy-sell agreements arose. I’m not sure who mentioned the subject first, but we both agreed that it is a very good idea for a company to have a buy-sell agreement with its shareholder, even if there is only a single owner.