Acquisition Structuring
July 28, 2024
by a searcher from University of Edinburgh - Business School in Sammamish, WA, USA
Does anyone have examples of how small business acquisition deals are structured? If you have examples of real-world scenarios and how different methods are used in each scenario, that would be super helpful, e.g., Under what conditions are earn-out warrants, key person methods used, and how are they used?
The reason i'm asking is:
1. I have a deal i'm evaluating (franchise) where:
1.1 the last year, there has been a 12% increase in revenue; the average is 6%
1.2 The owner is transparent with their bonus structure showing a 300% increase in performance bonus payments to key employees during this higher period of growth.
1.3 There is a change in the situation of the key people at the team is being restructured.
1.4 The owner is adding back the excess bonus payments to increase SDE in my view they double dipping if they do this, i.e it was the investment in growth that lead to this higher revenue so if bonus payments are taken out to get to sustainable earning the new revenue has to be taken out.
So i'm looking for deal structuring tips to use earn out, key person clauses to protect the buyer( me) and the seller. I don't want to overpay if the future does have the past performance with the changes in the situation of key people, and i can't valuve growth if the drivers of growth is being removed.if i give the owner benefit of the doubt and value growth i would like to add clauses to protect myself In addition, I also want to fairly compensate the seller for these intangible assets if these key people stay and the new revenue levels and earnings prove to be sustainable.
from University of Missouri in Denver, CO, USA
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA