Perfect target but seller won't hold a note

by a searcher from Pennsylvania State University

3 months ago

I found a perfect target but am struggling to manage seller expectations. It's a proprietary deal in an ideal industry, size, business model, geo, etc. The seller named their price which I met, but they also wanted 100% cash at closing. In a perfect world if they name their price, we get more flexibility with regards to structure. Perhaps I am a terrible negotiator but that was not the case for this deal in particular. I tried explaining why seller notes are important and beneficial, but the seller insisted holding a note wouldn't work for them. Feels like it's best to let it go for now, but I was curious if people ever waived a seller note for a seemingly perfect target? Thanks

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53 comments

investor from Pennsylvania State University

All options are contingent on if the seller is reasonable and truly depends on why. It's interesting how often decisions aren't made from a practical place. I would cross evaluate the multiples and valuation portion with and without the note to see if it's in line.

With that being said, how seasoned is your team? Seller may be intolerant due to lack of confidence in running the company?

-If the seller has a soft spot for taxes, then show value of the seller note with regards to taxes
-Seller retains equity, buy out in future
-Prioritized earnout / salary
-Installment type sale with funds in escrow
-Would the seller consider advice or letter opinion on current offer if you feel strongly it's fair

Many ways to slice and dice, but all comes down to common ground and how reasonable both parties are.

3 months ago | like reply | 0 likes

searcher from The University of Arizona - Eller College of Management

Offer some equity. The new sba rule that came out will allow the equity roll for an asset purchase. It counts as down-payment and you get the seller experience as part of you team.

3 months ago | like reply | 1 like

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