How to Avoid Valuation Problems with Life Insurance Associated with Buy-Sell Agreements

A Valuation Lesson on Video

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One of the biggest and recurring problem with buy-sell agreements is their frequent failure to specify the role of life insurance proceeds. In the accompanying video, I provide a suggestion to solve the future valuation question.

Business Valuation: Things Just Aren’t the Same Anymore After the Tax Cut and Jobs Act of 2017

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The Tax Cut and Jobs Act of 2017 lowered the marginal corporate federal tax rate to 21%, and all of a sudden, things just aren’t the same anymore. At first blush, the impact of the recent tax cut is straightforward. Lower taxes mean higher after-tax cash flows, which should translate into higher values for businesses. But how much higher? Value is a function of expected cash flows, expected risk, and expected growth. While expected cash flow (after-tax) will be rising following the corporate tax cut, what happens to expected risk and expected growth?

Fixed Price Buy-Sell Agreements and the Tax Cut and Jobs Act of 2017

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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.

Valuation Implications of the Tax Cuts and Jobs Act of 2017

Focus on Privately Owned C Corporations

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The Tax Cuts and Jobs Act of 2017 was signed into law by President Trump on December 22, 2017. President Trump calls the bill the biggest tax cut in American history, and there were substantial reductions in both corporate and personal income tax rates. The tax reduction act will impact C corporations as well as pass-through entities. This post focuses only on C corporations and looks at the marginal impact of the change.

A Reluctant Expert Witness “Confesses”

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Over the last 35 years or so, I’ve testified, at deposition or trial, about 200 times.
And so, I confess. My 10 “confessions,” though, do not reveal any startling secrets, but they do provide insight into how one (reluctant) expert views the job of expert witnessing after many years in the trenches.

Buy-Sell Agreements Stories

A Tortuous Buy-Sell Agreement Process

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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.