Why buy/sell agreements fail without independent valuation The document is only as good as its pricing mechanism, and most pricing mechanisms are terrible. Buy/sell agreements fail at the price. The trigger clauses usually work: death, disability, exit and deadlock are easy to draft. What fails is the machinery for turning the trigger into a number both sides accept, because the agreement fixed a price that went stale, named a formula that stopped fitting the business, or waved at “fair value” without defining it. An independent valuation process, written into the agreement before anyone needs it, is the fix for all

How to resolve a shareholder disagreement on share price A practical escalation path when you and your co-shareholder can’t agree what the shares are worth. When shareholders disagree on price, work up the escalation ladder from cheapest to dearest: check what your shareholders’ agreement already says, negotiate directly, jointly appoint an independent valuer, mediate with that valuation on the table, and treat the Companies Act 1993 remedies as the last resort they’re designed to be. Most disputes I see settle at the third rung. The valuation gives both sides something concrete to react to, and reacting to a document is

Valuation in family succession NZ What the business should sell for when the buyer is your son or daughter. When a business passes within a family, the sale price should start from an independent valuation at fair market value, even if the parents then choose to accept less. The valuation establishes what the business is worth; the family then decides, deliberately and in the open, how much of that value to gift. Skipping the first step is where family succession goes wrong, because nobody can measure a gift they never sized. Here’s why the number matters so much inside a

What is a fair price for an internal business sale? Setting the price when you sell shares to a co-owner, a manager, or a family member. A fair price for an internal business sale is one an independent valuer can defend to both the buyer and the seller: built on a stated standard of value (almost always fair market value), a method that suits the business, and evidence both parties can read. An internal sale happens away from the open market, so the price has to be built from evidence. Whether you’re selling shares to your co-owner, your general manager

Independent Valuation for Succession Planning The average age of New Zealand SME owners is now over 55 (Stats NZ Business Demography Statistics, 2025). A lot of them will hand the business on within the decade, to family, to their management team, or to an outside buyer. Succession has a feature that an ordinary sale doesn’t. The people who have to accept the number usually didn’t pick the person who produced it, and sometimes they’re related to you. This page is for information only. It isn’t legal, tax, or financial advice. Talk to your lawyer, accountant, and a qualified valuer about

Broker appraisal conflicts of interest A free appraisal is a customer acquisition cost. The broker earns nothing for producing it and a commission if you list and sell, so the appraisal is the pitch for the listing. There’s nothing sinister in that, and most business brokers I’ve dealt with are competent and honest people, the problem is structural. This page is for information only. It isn’t legal, tax, or financial advice. Talk to your lawyer, accountant, and a qualified valuer about your own situation. How the economics work A business broker earns a commission on a completed sale, usually a

Business Share Sale verusus Asset Sale A share sale transfers the company itself — shares, contracts, liabilities and tax history. An asset sale transfers only nominated assets and goodwill, leaving the company shell with the seller. You get two offers for the same business. One buys your shares, the other buys the assets. The two dollar figures won’t match, because they’re measuring different things. Read the headlines side by side and you’ll compare the wrong numbers. To compare them properly you have to convert one into the other. What each sale actually transfers A share sale hands over the company

Partner Buyout Valuation NZ: How the Price Is Actually Set A partner buyout valuation determines the fair price for one working owner to buy out another’s equity in a closely-held NZ business. The number isn’t usually the hard part. The choices behind the number are. In most NZ closely-held companies, the buy/sell clause in the shareholders’ agreement is silent on the things that decide the price: which standard of value, what level of value, what date. When those choices aren’t locked in, two competent valuers can reach numbers that are 50% apart. Both technically correct. This article is about the

Management Buyout Process NZ: How an MBO Actually Works A management buyout (MBO) is the existing management team buying the company, or a controlling stake in it, from the current owner. The team usually puts in some equity, the vendor leaves money in via a note, and a bank funds the rest. It’s a practical succession path that’s underused in NZ. About 50% of NZ SME owners are now over 55 (Stats NZ Business Demography Statistics, 2025), and a lot of them have capable management teams sitting right there. This article is about the process — the stages, the people,

How Much Does a Business Valuation Cost in NZ? A professional business valuation in New Zealand typically costs between $2,200 and $15,000 + GST, depending on who does it, what type of report you need, and what you’re using it for. Independent specialist valuers generally charge fixed fees starting around $2,200. Accounting firms work on time-and-materials and rarely publish prices — expect $7,000 to $15,000+. Business brokers offer free appraisals, but those aren’t independent valuations (more on that below). The range is wide because “business valuation” means different things depending on who you ask. A 40-page fixed-fee report for a

How Does a Shareholder Buyout Valuation Work in New Zealand? A shareholder buyout valuation determines the fair price for one shareholder to buy out another’s equity in a shared business. It gives both sides a defensible number so the deal can proceed without damaging the relationship or ending up in court. Most buyout valuations in NZ follow the buy/sell provisions in a shareholders’ agreement. Those provisions typically specify three things the valuer needs: the standard of value (usually fair market value), the level of value (e.g. non-marketable minority or controlling interest), and the valuation date. They may also set out

How to Value a New Zealand Business Using the Market Approach This article is about using the market approach to value a small or mid-market business, it covers description of the market approach how to use it in New Zealand problems with the market approach There are three approaches to valuing a business: asset, income and market. The market approach is based on the Principle of Substitution. This is where we value a business based on the cost of acquiring an equal substitute and use market-based methods. Within the market approach there are four methods:1. Direct Market Data Method2. Guideline

What’s the difference between a business valuation and a broker appraisal? A broker appraisal is a simplified estimate of what a business might sell for. It usually applies one of the three valuation approaches, the market approach, and it’s usually free, because the broker earns a commission if you list the business with them. An independent business valuation considers all three approaches, works through the balance sheet to an equity value, follows professional standards, and comes from someone with no financial interest in what the number turns out to be. In New Zealand it costs between $2,200 and $15,000 plus

Business Valuation for a Divorce in New Zealand In this article, I’ll step through the business valuation process from a divorce perspective. It may be useful to read my general article on business valuation first. Business Valuation for the Purpose of Divorce How do you value a business for the purposes of a divorce situation in New Zealand under the Property (Relationships) Act 1976? The business valuation principles remain the same but there are some differences from other business valuation situations. The courts have said that a valuation is no different an exercise from other purposes and that, “it is

What is Enterprise Value in New Zealand Enterprise Value (EV) is a business’ total value, including equity and debt, but not cash and cash equivalents. It’s often used for M&A situations where the phrase ‘debt-free and cash-free’ is often used in share sale and purchase terms. Likewise, it is often used in the market approach public comparables method. The data is usually Enterprise Value (but sometimes MVIC, see below) so this is the appropriate comparator to use. In a public stockmarket listed company, the calculation is reasonably simple:EV =market capitalisation (share price times shares)plus total short and long-term debtless cash

What is the Meaning of EBPITD or SDE in NZ? EBPITD stands for Earnings Before Proprietor’s (wages), Interest, Tax, and Depreciation. EBPITDA stands for the same thing plus Amortisation. New Zealand is moving to the American phrase Seller’s Discretionary Earnings (SDE). EBPITD’s meaning depends on the source. In New Zealand a small business sales transaction database called BizStats defines EBPITD or SDE as the earnings of the business before:– proprietors income (salary, wages, director fees)– interest– taxes– depreciation How to use EBPITD or SDE? EBPITD or SDE is used in the market approach in a method variously called Private Comparables (and

So how do you value a private business in New Zealand in these covid19 recession times? It’s not simple. The process I suggest is to: work out if your business truly is a going concern forecast your earnings and balance sheet during and post-shutdown analyse the risk of those future earnings in the coming years look for recent market data consider asset values accept the uncertainty of the valuation but be clear about assumptions and consider a staggered sale of equity. Let’s go through these. Going Concern: can the business survive? This is simply about cash flow or solvency. Do