Structure an Offer That Let's the Seller Participate in Eventual Upside

by a searcher from College of Charleston

2 months ago

I’m preparing to submit an LOI to purchase a small company in the Food &Beverage space at 1x TTM revenue. The acquisition target is a S Corp with three shareholders: 51%, 39%, 10%. The founder owns 51%; the other two shareholders were given sweat equity. I’d like to buy 100% of the company but create an opportunity for the founder to share in the potential upside – either a share of profits, or eventual sale, etc. I looking for advice and options on how to structure the offer.

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searcher from College of Charleston

Thanks Ali. As it stands now, this is a seller note that buys out three shareholders. This provides an out for the 2 minority shareholders and then I plan to negotiate something directly with the majority shareholder/founder to keep him onboard. I'm thinking about some sort of "Contractor" agreement that comes with RSUs worth 10% of the business that vest over 4 years. I'm wondering if I'm overcomplicating it, given it is a small deal and I'd like to keep things as simple as possible.

2 months ago | like reply | 0 likes

searcher from University of California, Los Angeles - UCLA Anderson School of Management

equity roll over, earn outs are the options depending on what type of lending you are using.

2 months ago | like reply | 0 likes

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