EARN OUT STRUCTURE TO LOCK IN A GOOD BUSINESS NOW, BUT ALLOW OWNER GROW IT?
Have been discussing transaction with owner at a ~2x EBITDA valuation. Owner realized that after taxes his take home is below his retirement goal (by about 1 year's profit). Business and deal are quite attractive, but owner may choose to operate it for another year rather than selling now. Is there a good earn out structure for me to be involved now, but allow the owner upside?
e.g. commit to 100% price based on current EBITDA. Scale current price by EBITDA growth at current multiple (with clauses for similar services at similar EBITDA margin sold)?
The trick I'm running into is how to structure this with upside to both parties
a) most of the structures I am thinking through seem like downside to the owner. It makes a lot of sense to just run the business another year @ no/low growth, take the earnings, and then sell it next year at the current valuation
b) has anyone worked through something like this with SBA? I'm assuming this is for a specialty lender
c) are there any good things to know when considering phased transactions... i) tax implications of now vs. later, ii) not taking full debt now because those funds would be sitting in escrow anyway contingent on earnout milestones