Navigating Partnership Disputes: Lessons from a Valuation Expert

About the Episode

What impact can a partnership dispute have on the value of a company? What is the difference between a legal valuation and a market-based valuation for M&A purposes? Expert appraiser Andy Frew answers these questions and more as he discusses what’s involved and what can go wrong with valuations involving companies that have a partnership dispute arise. He covers the complexities of valuing partnership interests and establishing a thorough valuation methodology to prevent disputes from escalating.

Even though I give owners a value, there may be other factors or something else that influences what that number ultimately ends up being.”

Andy Frew

What You’ll Learn

  • Standards of Value: An explanation of the three types of standards of value – fair market value, investment value, and fair value – and when each is used. 
  • Triggers: What can cause a partnership split or a dispute and the complexities involved in valuing minority interests in privately held businesses.
  • Experience: The critical role of experience and credentials for appraisers, especially when their work may be challenged in court or by regulatory bodies like the IRS.
  • Differences in Valuations: The distinction between valuations for legal purposes (e.g., partnership disputes, estate taxes) versus market-based valuations for M&A transactions.

Topics Covered

What triggers most partnership disputes? [1:57]
What is an appraiser’s role in the dispute resolution process? [4:05]
What are the differences between fair market value, investment value, and fair value? [9:30]
What is the difference between a valuation for legal purposes vs. a marketplace appraisal for M&A purposes? [17:35]
What should a business owner know before getting an appraisal? [24:30]
What are some of the issues that can impact a valuation number? [30:45]
What’s the role of a buy-sell agreement in the valuation process? [39:45]
What are the ramifications of not having a buy-sell agreement? [45:30]
Recommendations on books and authors that are worth reading about valuations. [56:02]
How did a Supreme Court case impact business valuations? [59:55]

“Hire the best advisor you can. The cost of not hiring sound legal, accounting, and financial advice can be devastating.”

Andy Frew

Want More? Related Resources: 

Books Mentioned:

Meet Our Guest

Andrew Frew

Andrew Frew

Business Appraiser, Mercer Capital | Houston, USA

Andy Frew, Vice President at Mercer Capital, has nearly 25 years of business valuation experience. He has been involved in hundreds of valuations and related engagements in numerous industries. Andy values businesses and business interests for buy/sell agreements, mergers and acquisitions, business succession/exit planning, and litigation support purposes.

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