Definition
What a “secondary disagreement” actually is.
A secondary disagreement is a dispute between minority holders and the majority over the fair value of their non-controlling share of a private company inside a secondary transaction. It is not the same thing as a disagreement about a sale. The sale is the occasion; the number is the matter. Two anchors are usually in play: the last-round mark that the minority has been holding against, and the current market reset that the company is offering into.
Both numbers are reasonable on their own terms. The minority is anchored to the price the company last told them the shares were worth — a documented mark, sitting on a cap table, basis for every internal and external decision since. The majority is anchored to a current private-market multiple, a refresh that is defensible in the abstract and unwelcome on the tender tape. The dispute is not which side is telling the truth. It is that two honest points in time produce two honest numbers, and the only people whose problem it is are the ones being asked to pick.
Mechanism
How sealed-bid auctions normalize the conflict.
A sealed-bid auction moves the fight from a bilateral negotiation into a structured room. Every counterparty posts their price and the basis for it into a sealed compartment. The compartments are sealed at submission and time-stamped. Nothing is visible to anyone in the room until the reveal.
The shift in mechanics does three things at once. It prevents the minority from anchoring on a single number before the full field is visible. It prevents the majority from re-anchoring after the field opens, because no party sees any other party’s bid until the reveal. And it forces every bid to arrive with a basis attached: who chose it, what peer set they used, what discount they took, what valuation date they rested on. The number without a story is the bid nobody can defend.
The midpoint that lands is the median of the highest-conviction positions in the room, after an AI neutral has scored every bid on comparability, recency, and risk. The midpoint is not a compromise. It is the function of the room, computed from who showed up with what, under rules both sides signed at the door. Positional bargaining deflates because nobody is bargaining positionally anymore; they are submitting to a process and accepting the answer the process produces.
Trigger
When to bring in a neutral mediator.
A neutral mediator belongs in the matter the moment any of these conditions is true: there are two or more bidders in the room whose basis memos diverge on peer set, discount, or valuation date; the cap table has a hard lock-up date inside ninety days; the matter is preparing to attach to a fairness opinion; or any counterparty is a family office, trust, or estate whose counsel will be reading the record from outside the transaction.
The mediator’s job in a secondary disagreement is not to choose the number. It is to set the rules of the room before the room opens — who is invited, what basis memo format they must use, how bids are scored, what the audit trail looks like, and how the median is computed. Both sides agree to the rules record in writing before any bid is posted. That makes the rules record a shared artifact, owned by nobody and reviewable by both sides’ counsel after the fact.
The strongest move is to retain the mediator before tenders are issued. A mediator hired mid-fight inherits a positional log; a mediator hired pre-room inherits a clean process. The difference is what the record looks like when counsel reads it six months later.
Checklist
Documentation counsel will demand.
The record that attaches cleanly to a fairness opinion, an IRS inquiry, or a divorce filing is the same record. Eight artifacts cover it; missing any one of them is the usual reason a sealed-bid room does not become a closed deal.
- Cap-table extract. A signed cap-table extract stamped with the cap-table date the secondary is priced against.
- Prior marks in scope. Every prior mark the company has issued or accepted in the last twelve months: 409A, last round, prior tender. Stamped with effective date.
- Comparable window. The window of comparable transactions the basis memos cite, with source and date for each transaction.
- Per-bidder basis memo. One memo per bidder: who chose the peer set, what discount was applied, the valuation date, and a written rationale the bidder can defend in deposition.
- Sealed-bid audit trail. Time-stamped, hash-sealed trail for every submission, every reveal, and every withdrawal. Exportable.
- AI neutral’s written rationale. Comparable in shape to a comparable-rationale.md artifact: why each bid was scored, in plain language, attached to the median computation.
- Mediator’s rules record. Joint rules record with counterparty-check results showing who was invited, who declined, who was added under what amendment.
- Settlement agreement + closing-disclosure pack. Signed settlement agreement and any closing-disclosure pack circulated to the parties’ counsel before signing.
A Velmark room produces all eight. If any item is missing when counsel asks for it, the deal that should have closed in six weeks turns into a year of depositions about the artifacts that should have been there.
Related reading
Pairs with the sibling post.
This guide is scoped to secondaries — the minority-versus-majority case where the price is the fight. For the broader background on contested valuations across co-founder splits, estates, divorce, and secondaries — and why a mediated midpoint is the most defensible answer on both sides’ terms — see the companion pillar, Mediating a contested valuation. Read it first for the four-scenario framing; read this one when the matter is specifically a structured secondary.