Preference in securing transition

by a professional from Hobart and William Smith Colleges

1 year ago

Hello Everyone, 

Reading up on the deals of the year and I was curious to know your thoughts.

In a world where you could either have an earn out provision or an escrow provision, but not both- which would you choose? 

0 likes
22 views
1 comment

searcher from University of Virginia

I would say structure your deal to accomplish what you want to accomplish. If you just need the owner to stay for transition, hold some money back until he's held up his end of that bargain. If you want to incentivize the owner to stay engaged in the business and grow it together as partners, get him to keep an equity stake or equity-like security. If you're try to ensure that the owner thinks growth forecasts are attainable, give him an earnout. If you want to hedge against hidden risks and downside use a seller note. These tools all accomplish slightly different things and align incentives in slightly different ways.

1 year ago | like reply | 1 like

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

Investor seeking Self-Funded Search Deals

What are market terms for Seller Notes?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.