Valuation Process Buy-Sell Agreements

The company should also consider designating an appraiser or appraisal firm in the valuation process buy-sell agreement. Careful consideration should be made during the selection process.  You will want to ensure that the firm/appraiser will be around when a triggering event occurs.  Additionally, you will want to determine if the firm/appraiser has the appropriate qualifications and can handle the project.  This determination can be made by specifying certain requirements in the buy-sell agreement including, but not limited to, education, training, industry experience, continuing education requirements and appraisal credentials.  Some of these may not be always necessary, but it is often useful to at least consider the appropriate appraiser credentials.  

Prior to making a selection, I recommend reviewing the credentials and requirements of the following appraisal organizations:

·         American Society of Appraisers – Accredited Senior Appraiser (“ASA”)

·         American Institute of Certified Public Accountants – Accredited in Business Valuation (“ABV”)

·         National Association of Certified Valuators and Analysts – Certified Valuation Analyst (“CVA”)

I think it is helpful for the owners to make the selection prior to entering into the valuation process buy-sell agreement. If everyone agrees from the beginning, then the owners are less likely to perceive bias in the process upon a triggering event. Additionally, the selection can require the process to be carried out by credentialed appraiser(s) who will be required to follow the ethical and reporting requirements as mentioned in my previous post. Again, agreeing on the appraiser (or at least the appraiser’s credentials) at the outset is particularly helpful if the buy-sell agreement requires more than one appraiser in the process.