Handle with care – Make sure buy-sell valuation provisions are clear
Abstract: Perhaps the most critical aspect of a buy-sell agreement is its valuation provision. Any ambiguity in the agreement’s pricing terms — or misunderstandings about what they mean — can lead to unpleasant surprises when the buy-sell agreement is triggered. This article describes three common approaches to setting a price, along with the importance of choosing terminology carefully. A sidebar illustrates the dangers of relying on book value to set a buyout price in a buy-sell agreement.