The Exit Toolkit · Sheet 7 of 20
Understanding deal structure
Cash, earn-outs and everything in between
Cash on completion
Full payment on the day. Lowest risk to you, and the benchmark against which every other structure should be judged.
Deferred consideration
Part of the price paid in instalments after completion. Ask what security you have for the unpaid sums: a guarantee, a charge, or just a promise?
Earn-out
Part of the price depends on the business's performance after completion. Define the metrics precisely, keep the period short, and treat the earn-out as upside rather than certainty. Many never pay in full.
Loan notes and shares in the buyer
You swap some of your price for paper: debt or equity in the buyer. Higher potential upside, but your money is now tied to their performance.
Buyer financing and LBOs
Some buyers fund the deal with borrowing, sometimes secured on your own company (a leveraged buy-out). This can slow deals and leave the company carrying debt, so it needs careful thought.
Completion accounts and adjustments
The price may be adjusted after completion for cash, debt or working capital. The mechanism matters as much as the headline number.
Bottom line
The headline price is only half the story. £1m in guaranteed cash can be worth more than £1.4m built on hopeful earn-outs. Always ask: who is the buyer, can they pay, and what happens if they don't?
General information only, not legal advice. Steven Mather Solicitor is a trading name of Kesters Nook Limited; legal work is carried out through Nexa Law Limited, authorised and regulated by the SRA (number 633024).