Several years ago, four recent college graduates joined together and formed a small software company. Over the course of a few years, the company thrived and grew, eventually attracting the attention of a certain software giant. The software giant offered the four entrepreneurs $100 million for their company. One of the four was eager to sell, but his fellow shareholders were not. Eventually, the deal fell through. Following this, the eager-to-sell shareholder became dissatisfied with his fellow shareholders and, shortly thereafter, quit his job. In accordance with the shareholder?s agreement, he demanded payment for his 25 percent ownership in the company. What he received was a check for $375,000 instead of the $25 million he expected. As a result, costly litigation ensued.
Valuation Issues in Shareholder and Partnership Agreements
The Legal Intelligencer
February 6, 2012