Deal structure to align buyer and seller betting on recovery?

by a searcher from Full Sail University

3 years ago

If a seller tells me that covid is just a blip for them—"Next year will be a banner year!"  how do I best structure seller financing to communicate "Great! I'll believe it with you if you put your money where your mouth is. Let's do this together..."

10 likes
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24 comments

intermediary

Great question and already great answers!

3 years ago | like reply | 1 like

searcher from The University of Chicago - Booth School of Business

Hey Elliot, I think the best way to make sure seller financing takes into account the exception for covid would be to have contingent pricing. For example let's say you are buying a $1m business with 500k upfront and 500k due over 5 years. Then you can say if expected sales of 2m that happened in###-###-#### pre covid) then I will as per above if sales drop by 50% then I am adjust prices down to X. Where X is the discount that is agreed. This way you pay less if covid bites. Hope this helps. In my view as it is a partnership with previous owner this protects you and for him you will have to probably agree not to do anything to artificially reduces sales!

3 years ago | like reply | 2 likes

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