Even the most successful businesses may run into roadblocks when struck by unexpected events, such as death, disability or divorce. A well-reasoned buy-sell agreement can help businesses maintain control and ensure orderly ownership transfers. This article discusses the ins and outs of buy-sell agreements, noting the importance of obtaining an independent appraisal and the need to define key terms such as the standard of value and the valuation date. All of these factors combine to generate a valuation that is objective, independent and fair.
When shareholders disagree — for example, when minority shareholders oppose a major corporate decision or a controlling owner is accused of wasting corporate assets — the owners may need an appraisal to equitably part ways. But before valuing a privately held minority interest, an appraiser has to address several issues, such as the appropriate standard of value, valuation discounts and adjustments, and the effective appraisal date. This article uses a hypothetical example to highlight these issues, showing how appraisers bring their experience and expertise to bear and help shareholders reach a fair settlement.