Cheryl inherited her husband’s 50 percent interest in a trucking and crop-spraying business in northeast Nebraska. There was no buy-sell and no mechanism to value Cheryl’s shares.
The company had over $1 million in assets but also $1m in debt. While the tax returns showed little profit the cash flow was solid and the debt could be serviced.
Cheryl filed an action for judicial dissolution of the corporation. Her husband’s business partner filed a pleading stating that he would purchase her half interest for $40,000, but that was not accepted by Cheryl.
The case went to trial. Cheryl’s expert valued the entire company at between $750,000 and $1,000,000. The other expert valued the company at $677,000 using the income approach.
The trial court averaged the adjusted valuations of both experts and valued the entire company at $639,914. Rather than $40,000, Cheryl’s judgment was for $319,957.
- Experts don’t always agree. Valuing a business is more art than science.
- A buy-sell agreement is very important for a closely held business.
- The first offer is not usually the best offer.
Source: Anderson v. A & R Ag Spraying & Trucking, 306 Neb. 484 (July 17, 2020).