Seller Financing or Minority Roll-over equity by the Seller

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by a searcher from Indian Institute of Technology, Roorkee
in Stockholm, Sweden

1yr ago

Seller Financing or Minority Roll-over equity by the Seller

Hello,

In case of (small/medium) businesses dependent on the seller (or a key shareholder) - for customers/sales channels or supplier engagements etc,

To secure financial & contribution commitments from the seller,
What is more advisable in your experience ?
- Seller Financing, or
- Minority Roll-over equity

What could be recommended T&Cs for such ?

This is for acquisition in auto-parts company (in Europe) turnover about §4 million (EBIT 15%)

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reply by an intermediary 1yr ago
from The University of Chicago in Chicago, IL, USA

Seller Financing is a lot better than roll-over equity. Seller financing has history of 50+ years. Roll-over is new. It has value for license retention or for second bite of the apple..

reply by a searcher 1yr ago
in Mississauga, ON, Canada

We've encountered lenders wanting both when the seller is essential/license holding. BUT, typically when we've done deals if the seller is super key (ie. multiple years to transition), we force both.

And when they're that essential, we don't want 5-10%, we typically want 15-25% rollover. Then a portion of seller finance since you can clawback clause it. Followed by whatever gap as cash day 1.

Have done a lot of deals in that structure without issues, but comes down to the seller believing in you as a buyer/operator.