If they ask, I will tell them. No real reason not to. In addition, if you plan on using seller financing, its critical they understand where they fall in capital structure - I would hope they would want to know cap structure.

I second ^[redacted]‌'s comment: don't tell if they don't ask, but be honest and upront about the structure if they do ask about it

I've had several sellers ask for specifics as well. Most of it comes from a concern around debt coverage. Interestingly, in one deal, it helped me get a bit more detail about the profit swings that ultimately made me walk away. As said above, it's going to come out at some point, so you should share it if they ask.

I like to use the "let's share the profits 50/50" line during the early stages of LOI negotiations on "ambitious" pro formas to gauge their level of concern. It not a perfect signal, but it's led to interesting conversations on several deals. Good luck!

Sellers want to know you can actually close a deal. Whether or not you are doing debt vs equity is usually not a big deal, but you need to show proof you can close

Great feedback guys. Really appreciate it.

You might view this as a chip in the negotiation process. By sharing some or all of this information, you encourage the seller to open up and share additional info that they may not have otherwise. Whether they share it out of concern or reciprocity, more info is better for you. So I say do it, but use it to get some information from the Seller in return.

I don't think anyone should think of this as an obligation. But it will likely give the seller more confidence that you will be able to complete the transaction. I have advised buyers and can think of one situation in particular where we lost the deal because we weren't able to fully satisfy the buyer regarding the details of the acquisition capital structure.

I don't feel it's an "obligation," but from my (admittedly secondhand) observations it's practically table stakes. Especially in a world in which you have an earn-out, seller note, rollover equity, etc. they'll all but demand - rightfully so - to understand where they fall in the capital structure.


Putting your sources and uses into a tightly controlled black box doesn't sound like a recipe for success when you're looking for transparent negotiations / candid information-sharing / ongoing partnership (at least during a transition period) from a seller.