Buy-Sell & Equity Owner Agreements
The Grossman Yanak & Ford LLP valuation professionals have significant experience valuing companies in the context of buy-sell agreements and equity owner agreements.
The use of buy-sell agreements has become commonplace in conjunction with the formation of most businesses. They are important, as they represent an agreement between the company and its owners regarding how future transactions contemplated by the agreement will occur.
In undertaking the process of drafting a buy-sell agreement, it forces all parties to the agreement to have an understanding of the nature of the agreement, its provisions, how certain mechanisms will work in the future, and how it impacts each party. At the time of executing the agreement, no one knows who will be the buyer and who will be the seller.
Many factors need to be addressed in an agreement to avoid future struggles in interpreting the document. It is important to consider the purpose of the buy-sell agreement, as well as addressing triggering events and valuation method possibilities. A detailed and clearly written buy-sell agreement will largely benefit business owners.
One of the most crucial questions to ask all parties to the agreement is the following: if a triggering event occurs, will the valuation mechanism in the buy-sell agreement accomplish the objective of providing a price for the company’s stock at the level the partners/shareholders agree to be reasonable?
We are often called to assist legal counsel and business owners with the development of the provisions in the agreement addressing how value is established upon a triggering event.