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Thread: Business Valuation - Severed Business Relationship

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    Default Business Valuation - Severed Business Relationship

    I was in business with 3 other people (all equal partners). My departure was anything but amicable and we're now trying to figure out the value of my 25% of the shares in the company. We could not agree on an amount, so we hired a CBV to place a valuation on the business. I invested a couple of years of my time in to this company and brought on several longstanding clientele, which I can no longer pursue, due to our shareholder agreement.

    I informally resigned a couple of months ago and they're now trying to only value the company up to the point of my resignation (which I never formally resigned on a specific date and never submitted written resignation). Seeing as I'm still an active shareholder (and to my knowledge, Director) in the company, should the CBV not use a current valuation of the company? I don't see the logic behind placing an outdated valuation on the company, aside from benefiting the other partners, as I know they've signed substantial business since I left. They advised me of the value of my shares recently, per the CBV, however I don't agree that current revenue statistics shouldn't be used.

    Should I be seeking a good lawyer to deal with them? I'd rather not incur the cost, but feel like I'm getting the short end of the stick. Any input appreciated.
    Last edited by randombizguy; 08-28-2012 at 04:14 AM.

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    A lawyer is going to be your best bet. None of us can really do anything about your situation. I can see the issue both ways. If you're still a shareholder of 25% of the business then you should get 25% of the current value. At the same time if you did resign a few months back your partners could be looking at this as that's the point where you're leaving the business and the time since then has only been to determine the value of the business at that time.

    If this has been as un-amicable as you say, I'm guessing you'd like to just be free and clear of this business. Is the difference in money between then and now really worth being stuck in this for more time? Is it worth the expense of hiring an attorney? Had you settled 3 months ago for the valuation of the company then would you have been happy? Why not just get out and move on. If you think it's worth fighting for more how about a compromise where you take something between what the company was worth then and what it's worth now?

    If the difference is a life changing amount of money then maybe it's worth hiring an attorney and fighting for the money. If it's not life changing it might be better to just accept their offer or try to negotiate a small increase under the threat of fighting. Sometimes it's better to make a clean break and move on rather than worrying about a little more money.
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    Valid points. I was hoping that we could have had this dealt with much sooner, however the partners decided to action their 90 day FMV calculation clause in our shareholders agreement. Seeing as they made me wait three months and I have heard that they've signed several very large deals since ($500,000/yr +), I'm reluctant to walk away as this would have a large impact on the valuation. That being said, what I heard was speculation and seeing as I no longer have visibility in to the company, it would be a shot in the dark, which would likely cost me thousands in legal.

    Guess I have some thinking to do. Finalizing things is attractive to me at this point as well.

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    Default Shareholders Agreement

    If the Company has a shareholders agreement it should contain provisions that cover this type of situation. Get a copy, read it and make them follow it. If there is no agreement, than it is a matter of negotiation. If that fails then litigation may be necessary.

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    Finalizing things is attractive to me at this point as well.
    That's what I'm wondering. I understand this isn't an amicable split and you'd naturally want whatever you can get. Trying to get it could be rather stressful and potentially cost a good deal of money. I'm not saying you shouldn't try to get what you can, but that it's probably worth evaluating whether or not the potential gains are worth the cost.

    Hard call and you'll have to decide which is worth more. Getting out if the situation once and for all or whatever potential money you're looking at.
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