Equipment appraisal for a partner or shareholder buyout
When one owner buys out another and the business runs on machinery and equipment, the equipment is appraised on its own: an independent, USPAP-compliant equipment appraisal, usually at fair market value as of a date the agreement or the parties set. The buy-sell agreement controls the definition of value, the date and who appoints the equipment appraiser. Lukes & Lukes is an independent Machinery & Equipment (M&E) appraisal firm; a NEBB-certified Machinery & Equipment Appraiser (CMEA) prepares every report, and a second senior appraiser reviews it.
By Jared Lukes · CEO & lead appraiser
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What the equipment appraisal covers in a buyout
A buyout prices an ownership interest. The equipment appraisal values one input to it: the machinery, vehicles and other tangible assets the company owns. A business appraiser or CPA takes that value, adds the rest of the balance sheet and the earnings, and arrives at the value of the interest. How the two connect is set out in business valuation vs equipment appraisal.
In a shop or a plant, the equipment is often the largest single line, and every asset on it can be checked against a serial number and a market.
The buy-sell agreement is the instruction
Most closely held companies with more than one owner have a buy-sell agreement, a shareholder agreement or an operating agreement with a valuation clause. Read it before anything else. It usually sets out these points:
- The standard of value. Fair market value is common. Some agreements use fair value, a formula, or a stated price updated each year. The governing definition is the one in the agreement or the statute, and counsel confirms it.
- The valuation date. Often the date of the triggering event: a death, a retirement, a withdrawal, a termination or a stated annual date. The appraisal develops value as of that date.
- Who appoints the equipment appraiser. One jointly selected appraiser, one per side with a third if they differ, or the company's accountant with appraiser support.
- What is valued. The whole company, the equipment alone, or specified asset classes.
- How the price is paid. Lump sum, installments or insurance funding. It does not change the equipment appraisal.
Premise: in place or removed
A buyout of a continuing company normally values the equipment in place and in use, as part of an operating business. That value is usually higher than the same assets sold piece by piece and removed from the floor. The report states which premise it applies.
Where the agreement or the facts point to a wind-down, the premise is orderly or forced liquidation value. The premises are laid out in FMV, OLV, FLV and NOLV, explained.
Why a buyout equipment appraisal gets read closely
The selling owner wants the value higher and the buying owner wants it lower, and both know the same shop. Condition, hours, deferred maintenance, and which machines actually run are known to each of them.
The report identifies every asset, states its condition as observed, shows the market evidence for each class, and labels any assumption the agreement directs. We confirm the premise, the date and the intended users in writing before the inspection.
What we need to start
- The buy-sell, shareholder or operating agreement, with amendments, and the notice that triggered the buyout.
- The fixed asset register and the latest depreciation schedules, which the inspection tests rather than adopts.
- The equipment list with locations, including leased and financed assets and who holds title.
- Maintenance records and any recent capital purchases or disposals.
- Site access, and a named contact on each side if the owners are no longer working together.
See our estate, probate and ownership-transition appraisal work →
Common questions
Answers, up front.
Does an equipment appraisal value a partner's ownership interest?
No. It values the machinery and equipment the company owns. The value of a partner's or shareholder's interest also reflects the rest of the balance sheet, earnings, and any discounts or premiums the agreement or law applies, which a business appraiser or CPA determines.
Which standard of value does a buy-sell agreement require for the equipment?
Fair market value is common. Some agreements use fair value, a formula or a stated price. The definition in the agreement controls, and the equipment appraisal applies it as written. Counsel confirms the standard where the language is unclear.
Can one equipment appraiser work for both owners in a buyout?
Yes. Many agreements call for a single jointly appointed equipment appraiser, and the engagement records both parties as intended users. Where each side appoints its own appraiser, each report is independent and the agreement sets what happens when the values differ.
What effective date does a buyout equipment appraisal use?
The date the agreement fixes, commonly the triggering event or a stated annual date. The equipment appraisal develops value as of that date, and the report says so. Where the agreement is silent, the parties and counsel set it before the work starts.