Deal structures: what the headline price hides

The headline price is the least interesting number in an offer. What matters is how much of it is certain, when it arrives, and what has to happen first.

Cash at completion

Money paid on the day. This is the only genuinely certain component, and the proportion of the total it represents is the single most useful measure for comparing offers.

Deferred consideration

A fixed amount paid later, typically over one to two years, usually not contingent on performance. Better than an earn-out because the amount is not in dispute, but you are an unsecured creditor of the buyer unless it is secured or escrowed. Ask what happens if the buyer’s own business struggles.

Earn-out

An amount contingent on the business hitting agreed targets after completion, when you no longer control it. Earn-outs bridge genuine disagreements about future performance, and they also fail often.

If you accept one, negotiate the mechanics harder than the amount. What exactly is measured, revenue or profit, and profit calculated how. Who controls the costs that sit above that line. What happens if the buyer reorganises, reallocates overhead, or changes pricing. What access you have to the numbers. What happens if you are asked to leave before the period ends.

Vendor loan

You lend part of the price back to the buyer, repaid with interest. Common in management buy-outs. It signals confidence and can widen the buyer pool. Take security if you possibly can.

Retention and escrow

A portion held back against warranty claims, commonly for twelve to twenty-four months. Normal and reasonable. Negotiate the size, the release schedule and what can be claimed against it.

Share sale or asset sale

A share sale transfers the company, with its history and its liabilities, and is what most sellers want. An asset sale transfers selected assets, leaving liabilities behind, and is what most buyers want. This is negotiable and has real tax and stamp duty consequences on both sides. Take advice specific to your position before agreeing which one.

Working capital

Completion accounts test whether the working capital left in the business is at a normal level. Agree the definition and the target early, in writing. This is one of the most common late disputes in SME deals and one of the easiest to prevent.

The question to ask about every offer

Not what is the price. What is the cash at completion, what has to happen for the rest, and who controls whether it happens.