Buy-Sell Agreements

A buy-sell agreement provides a way for a business or one of its owners to acquire the interest of a partner or shareholder 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 advisors frequently rely on WVA to assist them in drafting appropriate language to ensure that valuations are performed in accordance with the clients’ wishes.

WVA 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 procedures to be employed to ascertain the value; e.g. a formula or the process to obtain an actual valuation
• • The appropriate standard of value to determine value in accordance with the wishes of the parties to the agreement
• • The appropriate valuation methods to be used by the valuation analyst, along with the premiums or discounts to be applied in the process