As a majority, equal, or minority shareholder in your business, there may come a time when you need to address a buyout request from another partner or investor who is opting out of their ownership interest. When this occurs, there are certain things to put your focus on that will greatly impact the negotiated agreement, including engaging with a certified valuation professional.

Does your company have an internally developed buy-in/buyout or another type of operating agreement that lays the groundwork for assessing value in these situations? Proactively addressing these eventualities is never a bad idea and is quite common among rapidly growing businesses that are frequently seeking new investors to manage capital funding requirements and add value.

Is the partner a key contributor to annual revenue whose departure would affect the ongoing success of the business? Is there a non-compete agreement in place to buffer the effects of this departure in the short term? If not, should the company be valued with the anticipated losses in sales, or is there a mutually agreeable arrangement to replace the partner and offset this reduction?

If the investor is buying out of a minority interest, should discounts be applied to reflect the lack of control and marketability? This topic is commonly debated in valuation assignments, where the shareholder may not have significant decision-making power, and there may also be an inherent difficulty in attracting a new investor given this lesser interest.

Given that these variables may create a divide between the parties on the ultimate price to be paid with partner buyouts, the likelihood of a dispute may be high, and could potentially drag out the process, in some cases leading to litigation between the parties. Engaging a certified professional business appraiser will provide an independent, unbiased assessment of value, which will assist in facilitating a fair settlement.

Whatever the situation with your company, when a partner or investor opts to buy out, it will justify the need to formally update the business's value and associated shares so you and any remaining owners can work through this process to a successful conclusion. As a bonus, the additional benefits of an independent appraisal of your business and its underlying assets can go well beyond these immediate concerns and support future growth plans as you forecast your business's future.

When you're dealing with the dissolution of a partnership, there are any number of issues that you need to deal with over the situation. However, one option you have to help deal with determining the value of the leaving partner's share in the business will help you through the process more easily. By getting the valuation of partnership buyout calculated by a professional business valuation specialist, you can focus on more important parts of the dissolution process, such as allocating duties and clients of the departing partner. 

How Does the Valuation of Partnership Buyout Help Both Sides in a Dissolution?

A partnership dissolution is a difficult process. Duties must be reassigned across the entire enterprise in a way that makes it possible to continue operations as seamlessly as possible. Clients must be contacted and moved on to other partners in a fashion that keeps them happy with the process. Their specific responsibilities of that partner must be audited for any number of issues that may have arisen over the years of operation. Any changes in staffing that needs to happen with the change of partners should be addressed before the partner leaves the firm.

Another area, one that is often the most contested during a partnership dissolution, is the value of the business and the value of that partner's buyout. The partner who is leaving may have invested significant time, effort and energy into the overall process of building up the business. They may have brought business to the company when they joined or built it up through their reputation for innovation or excellence. It can be a very difficult process to determine what that portion of the company's value should be allotted to that partner.

What's more, a partner who is leaving a company may feel that they deserve a reward, after a fashion, for all of their hard work. However, the remaining partners may feel that this is unfair to the remaining partners who are continuing to stay with the business in the future, and a fair distribution of the company's value requires that all parties be treated fairly. Additionally, there could be any number of other factors that have shifted the estimated value of the company over the years.

For this reason, having a partnership buyout valued provides that fair value for your business partners. It allows a third party to independently determine the overall value of your business as well as the departing partner's share in the business. It gives you the opportunity to get past the point of bickering over the potential value of the business and who is owed what in favor of fair market value. This value is determined by a trained, experienced professional who will be using methodologies that have been in place for decades in years of testing across many situations.

By having a valuation of partnership buyout performed, many companies are able to more easily get through the process of a partnership dissolution by avoiding problematic issues surrounding business value. However, if you want to ensure that you don't have to repeat the process, make sure that the calculations are performed by a certified business valuation specialist. This ensures that the report they generate follows established, tested methodologies that have been carefully developed over the years.