1. WELCOME
Women Managing The Farm Conference
Manhattan, Kansas
February 13-14, 2014
Intricacies of Buy-Sell Agreements
2. Women Managing The Farm
Ron Beach
• Iowa farm kid
• Iowa State University – Ag Business
• Cargill – Nutrena Feeds (1982-1983)
• Farm Credit Services (1983 – 2002)
• Agriculture, Inc/I4, Inc. (2002 – Present)
• Peoples Company (2011 – Present)
3. Women Managing The Farm
Your Farming Business
• No business partner?
• A single business partner?
• 2-4 business partners?
• 5 or more?
• Formal business entity – written Partnership
Agreement, Operating Agreement, By-Laws?
• Buy-Sell Agreement?
5. Women Managing The Farm
What is a Buy-Sell Agreement?
“A contract that provides for the future sale of your
business interest or for your purchase of a coowner's interest in the business.”
a/k/a Buyout Agreement or Business Continuation Agreement
Business version of a
prenuptial agreement
6. Women Managing The Farm
Common Components
1. Triggering Events - death,
retirement, disability, insolvency of
a partner, exit (voluntary/nonvoluntary)
2. Restrictions on transfers
3. Time frame/deadlines for action
4. Formula or method of valuation
5. Terms of payment
6. Management vs. economic interest
7. Women Managing The Farm
Who needs a Buy-Sell and why?
Perpetuation of your business upon
the death of a partner.
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Do my heirs become your new partners?
Do my heirs have rights of management/voting?
Do you buyout my heirs – an obligation or right?
Do my heirs have a choice?
If buyout – what price, what terms?
When is the best time to negotiate the terms?
8. Women Managing The Farm
Who needs a Buy-Sell and why?
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Opportunity to acquire your partners
interest under reasonable terms.
Opportunity to exit and sell your
business interest at reasonable terms.
Can I sell? Can I be forced out?
Can I sell to anyone that will make me an offer?
Must I offer it first to partners? One or in equal
proportion?
Price?
Terms?
9. Women Managing The Farm
Who needs a Buy-Sell and why?
Maintain control over who your
business partners will be
I want out
• you won’t buy my interest
• you won’t sell me your interest?
• I sell to a third party?
• How do you control who your partner can sell
to…..but have a reasonable exit yourself?
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10. Women Managing The Farm
Common Mistakes
1. “Wait n See” Plan
2. Rigid or unrealistic deadlines
3. Not clearly defined - valuation, payment terms,
limitations, etc.
4. Valuation method unclear or doesn’t reflect true
market value
5. Lack of funding mechanism
6. Contrary to values and desired outcome
11. Women Managing The Farm
Examples
• Extreme Detail – adverse outcome
• Buy out at death – opposite outcome than
intended
• No Buy-Sell – at their mercy
• Buyer or Seller???
12. Women Managing The Farm
Summary
1. One or more partners – have a buy-sell.
2. Let your values dictate the terms.
3. Draft the agreement before you know if you’ll
be a buyer or seller.
4. Use a competent advisor when drafting the
terms.
5. Fund it!
