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Deal Structure

The mix of cash, seller notes, earnouts, and rolled equity that makes up an offer, used to bridge valuation gaps and shape what the seller actually nets.

Price Is Not the Same as Terms​

A headline price is only one variable. The structure beneath it, how much is paid in cash at close, how much is deferred, and how much is contingent, often matters more to the seller's real outcome. Warrillow captures the buyer's instinct in a single adage:

"You set the price, I'll set the terms."

Warrillow, The Art of Selling Your Business, ch. 14

The lesson is that an acquirer will happily agree to a big number if they get to decide how and when it is paid. McDannell makes the related point that offers cannot be ranked on price alone: they have to be compared on structure, cash, financing, deposit, and fit, which she describes as comparing "apples to carrots to candy bars." Two offers at the same nominal price can be worlds apart once you account for what is guaranteed.

The Building Blocks​

McDannell frames structuring as combining four ingredients: cash, seller notes, equity or stock, and earnouts. She calls larger, more complex deals her favorite part of the work. The pieces trade certainty for upside:

  • Cash at close is the guaranteed, up-front money. Warrillow calls this the downstroke: the minimum guaranteed money you make from a deal, excluding any contingent earnout.
  • Seller financing (a seller note, seller carry, or vendor takeback) is the seller lending part of the price and collecting payments over time, usually behind the buyer's bank loan. McDannell notes it can bridge gaps and signal confidence, but the seller carries default risk.
  • Earnouts tie future payments to post-sale performance.
  • Rolled equity or a recapitalization lets the seller keep a stake to sell later, what Warrillow calls a second bite of the apple.

Warrillow reframes these as four post-sale roles you can play: Lender (a seller note), Division Executive (an earnout), Consultant (a fee), and Shareholder (a recapitalization). Each trades guaranteed cash for larger potential upside.

Treat Contingent Money as Gravy​

Both authors warn against leaning on the contingent pieces. Warrillow's rule is to treat earnouts and structured upside as a bonus, never as your real proceeds, because the new owner controls your P&L and has little incentive to help you hit targets. He quotes Rod Drury:

"I never counted the earnout... I think [you should count an] earnout as a bit of a bonus."

Warrillow, The Art of Selling Your Business, ch. 15

Burlingham echoes the warning bluntly: earnouts transfer risk to the seller while removing the buyer's incentive to help, and most end early. McDannell is the most cautious of the three, advising sellers to avoid earnouts at all costs, especially ones requiring full-time involvement, and to cap both seller carry and earnouts at roughly 20% of the price. The shared conclusion: never let cash at close fall below the amount you actually need.

Flexibility Buys Leverage​

Counterintuitively, being open to many structures strengthens your hand. Warrillow argues that appearing flexible on deal structure draws more bids, and more bids paradoxically let you dictate the role and terms you actually want. Rigidity narrows the field; flexibility widens it, which is why structure is a negotiating tool, not just an accounting detail.

Further Reading​

Sources: McDannell, Get Acquired ch.6; Warrillow, The Art of Selling Your Business ch.14-15; Burlingham, Finish Big ch.3, ch.8.