Drafting Valuation Provisions for Closely Held Businesses in Buy-Sell Agreements and Governance Documents

Methodologies and Adjustments: Accounting for Real Estate Assets, Goodwill

Recording of a 90-minute CLE video webinar with Q&A


Conducted on Tuesday, March 30, 2021

Recorded event now available

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Course Materials

This CLE course will examine practical and legal issues in determining a closely held entity's value when facing a sale of a portion or the entire ownership interests. The panel will discuss the various forms of valuation methodology and how to incorporate these terms into governance documents and buy-sell agreements, as well as address future adjustments and the implications of valuing real estate and goodwill assets.

Description

Corporate counsel that represents a closely held entity, whether it is a corporation, LLC, or partnership in which there are a small number of owners and no public market for the stock or shares, it can be difficult to discern the business' value. Whether the owners are looking to sell a portion of the business or the entire enterprise, creating a framework for valuation early in the corporate legal development can alleviate future disputes.

There are numerous valuation methodologies and advantages and disadvantages to using each. Some methodologies favor particular industries and whether conflicts of interest exist or where a fiduciary duty is owed. Drafting these provisions can also forestall future disputes among owners.

Outside of governance documents, corporate counsel might consider drafting buy-sell agreements that include methodology and adjustment provisions. However, counsel must consider when and how to incorporate an entity's real estate, whether it should be part of a single-asset sub-entity, and how and when to address goodwill as part of business value.

Listen as our authoritative panel discusses best practices for drafting valuation provisions in corporate governance documents and buy-sell agreements. The panel will address the various valuation methodologies and how corporate documents should anticipate adjustments and fixed value of all assets, including real estate and goodwill.

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Outline

  1. Valuation methodology
    1. Net asset value
    2. The earnings approach
    3. Dividend-paying capacity
    4. The market approach
  2. Valuation adjustments
    1. Lack of marketability
    2. Minority interests
    3. Loss of a key person
    4. Built-in capital gain
  3. Buy-sell agreements and fixing value
  4. Attribution of value
    1. Real estate assets
    2. Goodwill as asset

Benefits

The panel will review these and other key issues:

  • How should counsel assist in determining the value methodology in corporate governance documents and/or buy-sell agreements?
  • When should value adjustments be made to corporate documents to reflect business growth?
  • When should a buy-sell agreement address fixed value?
  • How can counsel work with appraisers, accountants, and other professionals to determine or calculate business assets, including real estate and goodwill? When should real estate be spun out away from other assets in determining value?

Faculty

Berselli, Brent
Brent Berselli

Partner
Holland & Knight

Mr. Berselli is a partner in Holland & Knight's Portland office and is a member of the firm's Private...  |  Read More

Nadel, Heidi
Heidi A. Nadel

Senior Counsel
Holland & Knight

With two decades of sophisticated and diverse trial and appellate experience, Ms. Nadel concentrates her practice on...  |  Read More

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