Buy-Sell Agreements

Auctus Development provides strategy consulting services to enterprises and shareholders across the United States and around the world.

When owners of a company, joint venture or property decide to sell out to each other, they frequently use a process wherein one owner picks a price and the other owner decides whether to buy or to sell at that price.  In its simplest form, the process is an adult version of two children splitting a glass of lemonade – one pours, and the other chooses.

In the business world, this type of buy-sell arrangement may be called:

  • Shotgun
  • Chinese Auction
  • Texas Shoot-out
  • Mexican Standoff
  • Russian Roulette
  • Savoy Clause
  • Push-Pull
  • Sudden Death or Suicide

At first blush it would seem that picking an offer price would be a relatively straightforward process. In fact, it is not. Because the company, property or asset is worth differing amounts to each owner, choosing the right offer can be daunting. Each party has different business drivers, and outcome ramifications vary significantly by party.  With the proper guidance, however, it is possible for the offerer to sell at a significantly higher price than book valuation, or buy at a significantly lower price than book valuation. For example, the joint owner of a privately held Pennsylvania manufacturing firm recently bought out his partner for $1.3 million less than the client’s initial valuation of the company ($3.5 million – a 37% discount).

Using input from the client’s valuation/appraisal, legal and accounting/tax teams, and adding the client’s risk-reward and resource profiles, Auctus Development uses proprietary analytical tools to identify the best range of offering prices providing optimal returns at acceptable risk levels.  Auctus’ value added services may also be offered under the spectrum of services delivered by trusted advisors to the client.  

Analysis Topics

  • Client’s Buy and Sell Valuations
  • Other Party’s Value Probability Curves
  • Client’s Risk Profile (including Endowment Effect)
  • Client’s and Other Party’s Resources
  • Financing
  • Ownership Ratios