Buy-Sell Agreements

Does your company have a buy-sell agreement? 

When was the last time you looked over the buy-sell agreement?

Do you understand how your company will be valued under the buy-sell agreement? 

How will the buy-out be funded?    

These are just a few questions to consider if you are a partial owner in a privately held company. Many entities have buy-sell agreements in place. However, in my experience, once the agreement is drafted it’s placed in a file and forgotten until a triggering event occurs. This is understandable considering most business owners are concentrated on growing their business – not contemplating death, disability, getting fired/quitting, retirement or divorce. The fact remains that any one of these situations may occur unexpectedly and lead to unintended results for the involved parties. It is prudent to have a plan in place and understand your company’s value for these possible events. Over the next series of posts, I will take a deeper dive into buy-sell agreements and point out some pitfalls and things to keep in mind when entering into these useful, but often misunderstood agreements from a valuation perspective.