Buy-Sell Agreement Valuations

Independent valuations for buy-sell agreements, partner buyouts, and shareholder transitions. Fair to both sides, defensible to either.

What this engagement is

Every multi-owner business eventually triggers its buy-sell agreement: a partner retires, a shareholder dies, a marriage ends, an owner wants out. At that moment the only question that matters is the price, and the agreement either answers it cleanly or hands the owners a dispute. This engagement produces the independent valuation that sets or supports that price, fair to the buying side and the selling side at the same time, because we do not represent either one. We represent the number.

The better version of this engagement happens before anyone triggers anything. A valuation done when the agreement is drafted, and updated on a regular cycle, means the owners already know the number before the event arrives. Funding matches value, expectations match reality, and the remaining partners are not negotiating against a grieving family.

Who orders it

The company itself, groups of partners or shareholders jointly, and the attorneys and CPAs who advise them. Insurance advisors also order these engagements to size the life insurance that funds the agreement. When the parties are already in disagreement, we are frequently engaged jointly by both sides as the neutral appraiser named in the agreement.

What standard governs it

NACVA professional standards govern the work, prepared as a calculation of value for routine updates and funding reviews, or as a conclusion of value when the transaction is contested or the agreement requires a formal opinion. The agreement's own definition of value controls the assignment, and we follow it exactly: fair market value, fair value, or a formula the document specifies. If the agreement's valuation language is ambiguous, we flag it to the attorney before the ambiguity becomes a lawsuit.

What the deliverable looks like

A written report that states the standard of value the agreement requires, presents normalized earnings with each adjustment shown, applies and reconciles the appropriate approaches, and concludes a value both sides can examine line by line. Defensible to either side is the test: the departing owner's advisor and the company's advisor should be able to read the same report and find the same support for every figure in it.

Timeline

Routine buy-sell valuations and scheduled updates deliver in two to four weeks. Triggered events with funding deadlines or legal calendars move faster, and we will commit to a date at engagement.

How the process works

We read the agreement first, before any financial analysis, because the agreement is the assignment. It tells us the standard of value, the valuation date convention, whether discounts apply, and who is entitled to see the work. Then the familiar discipline: three to five years of normalized earnings with every adjustment documented, the approaches that fit the company, a reconciled conclusion. Where the engagement is a scheduled update rather than a triggered event, the process is lighter and faster, because the prior file carries most of the groundwork forward.

The three failure modes we see most

The first is the stale certificate: an agreement that calls for an annual agreed value, last updated nine years ago, now binding the parties to a number nobody believes. The second is the formula that aged badly: a multiple fixed in the document a decade ago that now produces a value wildly out of step with the market. The third is silence on the standard of value, which leaves both sides free to hire experts with opposite instructions. Every one of these is inexpensive to fix while the owners are on good terms and expensive to litigate after a trigger. If your agreement has one of these problems, the valuation engagement will surface it, and your attorney can repair the document before it is tested.

Where to start

If your agreement names a valuation requirement you have not met, or has no current number behind it, contact us and we will review the agreement's valuation clause at no charge. If you want a preliminary read on the company first, start at indication.oakstonevaluationgroup.com.