A buy-sell agreement can provide a mechanism for a business or one of its owners to acquire the interest of a partner or stockholder who withdraws from the business either voluntarily or involuntarily. The agreement may contain a designated price or a formula to use to determine the price. If so, the price or the formula needs to be updated periodically. Payment terms and conditions of sale are also generally provided. Clients and their attorneys frequently rely on Trugman Valuation to assist them in drafting the proper wording to insure that valuations are performed in accordance with the clients’ wishes.
Trugman Valuation can assist in making sure that the portion of the agreement regarding valuation is worded clearly so that the valuation process is without ambiguity. This will often involve establishing at least the following:
- The appropriate standard of value to determine value in accordance with the wishes of the parties to the agreement
- The procedures to be employed to ascertain the value; e.g. a fixed formula or the process to obtain an actual valuation
- The appropriate valuation methods to be used by the valuation analyst, along with the premiums or discounts to be applied in the process