Buy-Sell Agreements: Concluding Thoughts

May 2019 | Posted in Forensic Litigation & Valuation
Forensic Litigation & Valuation

In our previous posts on buy-sell agreement considerations, we have pointed out several important points that, in our experience, are often unaddressed or lacking clarity in an agreement.  To summarize, the five important questions your buy-sell agreement must answer in order to be effective are:

  1. What type of value estimate is required?
  2. When should the value be measured?
  3. What should be valued – the company as a whole or a partial ownership interest?
  4. Should the buyout’s funding mechanism be taken into consideration in the value?
  5. How will the value be determined?

Other concluding thoughts to remember as you review your existing agreement or develop a new agreement include:

  • There is no perfect answer that fits all situations.
  • Addressing these five questions will go a long way toward making your agreement more complete.
  • Choose a structure that fits the needs and desires of the ownership group as closely as possible.
  • Understand and agree to accept the shortcomings and trade-offs of the selected structure.
  • Review the document on a regular basis to ensure that the agreement continues to serve its purpose.

We hope this series has been helpful and we welcome the opportunity to answer other questions or share our experience from other situations.  Please contact us at whitley.penn@whitleypenn.com if we may be of assistance.

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