Buy-sell agreement valuation services

Buy-sell provisions activate at the worst possible moments to be negotiating price — practitioners sometimes call them the five Ds:

• — Death — the estate needs liquidity; the survivors need certainty about ownership
• — Disability — a partner who can no longer work but still owns a share of the earnings
• — Divorce — a spouse's claim on a partnership interest the other partners never chose
• — Departure — retirement or a move to a competitor, voluntary or otherwise
• — Disagreement — deadlock between owners that only a priced exit can resolve

In every case, the question is the same: at what price? An agreement that answers it clearly — with a current, defensible value — turns a crisis into a transaction. One that doesn't turns it into litigation.

Agreements typically price the interest one of four ways, and each has a failure mode worth knowing:

Fixed price. The partners agree on a number and write it down. Simple — and almost always stale by the time it matters. A fixed price set five years ago describes a different business.

Formula. A multiple of revenue or earnings, or book value. Predictable, but formulas freeze a moment's market logic: the multiple that was fair when drafted may badly misprice the business after margins, mix, or markets move.

Independent appraisal at the event. The most accurate — the value reflects the business as it stands — at the cost of time, expense, and occasionally dueling appraisers if the agreement doesn't specify who values and how.

Agreed value, regularly updated. The partners adopt an independent valuation, then refresh it on a schedule. Done annually, this is the best balance of cost, speed, and fairness for most closely held businesses — and it is the mechanism we most often support.

• — Stale values. The most common failure. An agreement priced in a different era binds someone — buyer or seller — to a number that is no longer true.
• — Undefined standard of value. "Fair market value" with discounts, or without? Pro rata enterprise value? The difference on a minority interest can exceed thirty percent, and silence invites a lawsuit.
• — Funding mismatch. Life insurance sized to an old value leaves survivors short. Recent case law on company-owned policies has also changed how proceeds interact with redemption values — worth a review with counsel.
• — Tax landmines. Redemption versus cross-purchase, basis consequences, and — for family businesses — whether the IRS will respect the agreement's price for estate tax purposes.
• — No process for disputes. The agreement names a price mechanism but not what happens when someone disagrees with the output.

We are valuators, not lawyers — drafting belongs with counsel. But the valuation clause is where most agreements fail, and we routinely work alongside attorneys to make sure the mechanism the agreement adopts will produce a number both sides can live with.

The economics of staying current are favorable: after an initial full valuation, an annual calculation update — refreshing the model against current financials under procedures agreed in advance — costs a fraction of the initial work and keeps the agreement's value real. Most disputes we see trace to an agreement that was priced once and never touched again.

Medical groups concentrate every buy-sell difficulty at once: values that swing with reimbursement and payer mix, buy-ins for incoming partners that must be priced fairly against the buyouts of retiring ones, goodwill that is partly personal to each physician, and — for groups with ancillary revenue and referral relationships — regulatory constraints on what the price is even allowed to be.

We bring both the valuation discipline and the healthcare-specific fluency these agreements require. See medical practice valuation for the broader practice-valuation context, and healthcare business valuation for regulatory fair market value considerations.