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 […]
On Monday, September 26, I presented a webinar in which we examined the recently proposed changes to Section 2704 of the Internal Revenue Service Code from business and valuation viewpoints.
It is clear that the DOT/IRS are attempting, through Proposed Changes to Section 2704 of the Internal Revenue Code, to eliminate minority interest discounts and marketability discounts (DLOMs), even though those terms are not mentioned at all. I have read the Proposed Changes as a business appraiser and a businessman. They may have succeeded in eliminating “minority interest discounts” and “marketability discounts” as those terms are currently used. However, I do not think they have succeeded in eliminating valuation discounts in fair market value determinations for family partnerships or other family entities.
My thoughts are compiled in a new whitepaper, “Valuation Implications of the Proposed Changes to Section 2704”.
On November 4, 2016, I will be speaking at the AAML Annual Meeting addressing a topic that is near to my heart as a business appraiser: An Integrated Theory for the Major Valuation Issues of Today. While each of these issues is worthy of hours of coverage, I provide an overview these issues in my post today.
On Monday, July 25, 2016, Verizon announced the acquisition of the operations of Yahoo for $4.8 billion. I waited on this post because it really isn’t about Yahoo, but about lessons for closely held business owners and their advisers. In any event, that $4.8 billion value for Yahoo’s operation was a far cry from previous indications of value for Yahoo.
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.
In this post, we consider a hypothetical situation of a closely held or family business to discuss the concept of the special dividend.
In the last post, we examined a conceptual diagram showing the relationships between two different balance sheets and two separate measures of total capital value for a business. In this post, we return to our example and these relationships to discuss the absolute equity and total capital valuations of the three public companies, and then, at their relative valuations.
In an earlier post, we began a discussion of the differences between two total capital valuation concepts, market value of total capital (MVTC) and enterprise value. In this post, we will add to the discussion.
It is important to understand key balance sheet and market value concepts as well as how they relate to each other. Appraisers and market participants examine market evidence for publicly traded companies to infer valuation metrics for private companies. In valuation-speak, this method is called the guideline public company method. A number of market multiples are commonly examined using the guideline public company method.
