DEAL STRUCTURES
There are many ways in which a business sale can be structured to fit in with your objectives. KBS Corporate will always act in your interests to achieve the best possible outcome - i.e. securing the maximum value for your company and ensuring that the terms in which the agreed price is paid are favourable.
Here are some of the more common deal structures:
- Cash on completion
- Deferred payments
- Earn outs
- Investment/ elevator deal
This is the preferred option for many of our clients. Cash on completion works in favour of those who are looking for a clean exit - those going into retirement for example, or someone who is in ill health. Once the company is sold, the buyer gains immediate ownership while a handover period is usually agreed on by both parties. Payment of the transaction is settled once the handover period is complete.
With deferred payments, a proportion of the price is paid after completion of the sale; on a monthly, quarterly or annual basis. This allows the buyer to pay for the transaction out of future profits, rather than handing over too large a sum at any one time. By accepting payments over a certain amount of time, the value of a client’s business can often increase.
An earn out is when an initial sum is paid upon completion and then additional performance-related payments are made subject to certain caveats. Further payments are often linked to future growth and may require the seller to remain in the business for a period of time in order to assist in meeting the agreed criteria. This type of transaction would also allow the buyer to finance the deal from future profits.
This type of deal allows owners of growing businesses to essentially ‘de-risk’, and take a proportion of the cash ‘off the table’ by selling a percentage of the company. Typically, such owners would remain involved alongside the incoming investor so the business can grow further. Often, the owners exit at a future stage with a ‘smaller piece of a much larger pie’.