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November 01, 2006 Buy/Sell Agreements
Buy/sell agreements are often dusty documents written 10, 15, 20 years ago.
Every client that engages Quist (if they can find them) provides us with
that old buy/sell agreement that hasn't been read in years. When asked about
the buy/sell language, clients usually "kind of" remember what it says and
rarely do they remember the valuation language. The attorney suggested the
language, they understood it at the time, and went with it.
Yet when a partnership fails, an owner tires of his/her role, or simply
moves in a different direction, that unclear language becomes very clear
from two sets of lenses, the buyers and the sellers. One set of lenses is
near sighted and the other far sighted so to speak. The remaining partner
shifts their expectations from bullish to chicken little and the departing
shareholder remembers the amazing growth path and opportunities that he/she
built into an 'amazing' organization.
So how do you avoid the anxiety? Its simple, have the value of your company
determined periodically and well before the horns grow out of your partner's
head. A simple review of value in accordance with the buy/sell can set
realistic expectations, identify potential risks and weaknesses in your
business model, and in the end save you a very expensive dispute that almost
always ruins one of the most important relationships in your life, the
partner with whom you are building your business.
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