Earnouts or Sellers financing

by a searcher from Georgetown University - The McDonough School of Business

6 years ago

Any thoughts on earnout structures? Thinking about presenting an offer structured as 25% down, 25% @ 1st year anniversary and 50% @ 2nd year anniversary.  Deferred portion paid at valuation at time of payment. Hoping seller will be interested in capturing value from prospective growth while being able to retire as he wishes to.

9 likes
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3 comments

searcher from University of Cambridge

Agree/set a threshold EBITDA for the seller, and let him co-benefit from the upside above threshold

2 months ago | like reply | 0 likes

searcher

Mario, go for 100% seller financing right of the bat. Your low ball offer from the jump. However, remember the portion of the business the seller takes a note on is the portion he/she thinks is worth something. But if they do 100% seller finance then they think the business isn't worth a damn. The 100% you can also use commercial debt to the extent you've got the foundation for that.

4 months ago | like reply | 0 likes

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