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Hidden Problems with the Price Formula in Your Buy-Sell Agreement, and Solutions

By Al Statz | June 19, 2017

It is tempting to select a formula approach to pricing shares when business partners come and go. After all, a formula is easy for everyone to understand, and in theory at least, inexpensive to apply. If you’re satisfied with getting to a price, any price, then congratulations – job done. But the goal is to…

Make No Mistake: The IRS is Serious About Qualified Appraisals and Appraisers

By Al Statz | May 22, 2017

The IRS and the Tax Courts are serious about requiring taxpayers to properly determine the value of non-cash estate assets, gifts and charitable contributions. To avoid having the value of an inherited, gifted or donated privately-held business interest challenged or rejected by the IRS, obtain a qualified business appraisal (valuation) from a qualified business appraiser.…

How a Covenant not to Compete Affects Value

By Al Statz | June 15, 2015

When someone sells a privately-held company, the buyer usually insists that the seller sign a covenant not to compete. In fact, in over 20 years of business sales and acquisitions, I have yet to see a purchase agreement without a covenant-not-to-compete (CNTC) provision. Now let’s say that your Company or its shareholders purchase all of…

The Importance of a Credible and Competent Expert

By Al Statz | December 6, 2014

The need for business valuation arises in many circumstances ranging from dispute resolution, estate planning, to the sale of a business to name only a few.  As in all professional disciplines, it is important to hire a knowledgeable expert who is abreast of current best practices and able to discern relevant facts that will determine…

Do Prior Purchases of the Subject Equal Market Value or Fair Market Value?

By Paul Hyde | July 10, 2017

I recently became involved in a very interesting case – the valuation of an independent insurance agency for a divorce. I was asked to review this appraisal and subsequently to testify in court. The business appraiser asked to appraise the agency used the same formula that was used when the agency was purchased from its…

Watch for Painful Provisions in Shareholder Agreements

By Paul Hyde | May 8, 2017

I recently encountered the following instructions in a Shareholder Purchase Agreement for a Company that I was asked to appraise.  If this provision is ever followed, it will very likely result in some very painful results.  Here is a summary of the instructions relating to the business appraisal in the agreement: First, both the decedent’s…

Cash: Can You Have Too Much of a Good Thing?

By Paul Hyde | April 10, 2017

We have all heard the expression, “Cash is King.”  This is certainly true in business.  When a business runs out of cash, is unable to borrow more or acquire more from another source, the game is over, it is time to pack up all toys and go home.  The biggest reason that a business goes…

Dealing with “Hiding the Ball” Scenarios

By Paul Hyde | December 12, 2016

Occasionally, a client is not able to obtain all of the data necessary to clearly support the value of an asset needing to be appraised. This seems to happen most often in some type of litigation scenario. I recently received an inquiry from a former student in a business appraisal class that I taught a…

The Most Important Factor

By Paul Hyde | June 24, 2014

There are a lot of important factors to address when reviewing any type of appraisal report.  However, in my opinion, the most important factor every appraisal must pass is….. THE SMELL TEST!  Does the value conclusion make sense and does it smell right? It is the appraiser’s job in every appraisal assignment to explain and…

Short NOT Sweet

By Paul Hyde | May 6, 2014

I am frequently asked to review another appraiser’s work and to state whether or not I agree with their conclusion of value.  Most of the time, this is not particularly difficult to do as the appraisal contains sufficient information to allow me to determine whether or not I agree with the analysis and the appraiser’s…